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What The Obamacare Replacement Bill Means Depends On How You Get Your Coverage

After much anticipation, we finally have a first draft of the Republican plan to undo the Affordable Care Act. Called the American Health Care Act, the House bill was released on Monday, and included many expected changes approached in unexpected ways. The ACA’s individual mandate, for example, which requires most people to have insurance or face a tax penalty, would not only be gutted, but its repeal would be made retroactive to the beginning of 2016. Tax credits for people who buy insurance on marketplaces set up by the law would be based on age, but income would also play a role. And people would be penalized for lapses in health insurance coverage with a monthly surcharge on the premiums they pay when they do acquire insurance.

Although Republican efforts to undo the Affordable Care Act are often described as “repeal,” GOP members of Congress cannot get rid of the law whole cloth, because to do so would require at least some support from Democrats (60 votes are needed to repeal a bill in the Senate, and Republicans occupy only 52 seats). Instead, they are using a maneuver that requires a simple majority and only allows for changes to provisions that affect how much the law costs the federal government.

Although we don’t know how much the bill will cost or have estimates on how it would affect coverage — the Congressional Budget Office’s analysis hasn’t yet been released — it would almost certainly leave fewer people with insurance than the Affordable Care Act. We’re still figuring out many of the details, but here are some key implications of the House bill for three blocs of people under age 65, grouped according to how they get their insurance coverage:

People living in relative poverty

The ACA expanded Medicaid, the federal insurance program for low-income people, by more than 11 million people in 31 states. The change broadened coverage to anyone with an income that is less than 138 percent of the federal poverty line, but a Supreme Court decision allowed states to choose whether to participate. The new bill proposes to freeze that expansion Jan. 1, 2020, preventing more people from joining the expanded program after that point. History has shown that freezing the program dramatically cuts the number of people who are covered.

A 2010 Medicaid freeze in Arizona led to a swift decline in coverage as people’s incomes changed, removing nearly 70 percent of adults from the rolls in two years. And the number of children on a state health insurance program plummeted when it was frozen, resulting in more than 100,000 children ending up on the program’s waiting list 18 months later, according to research by the Center for Children and Families at Georgetown University.

Financial changes to the program would also reduce eligibility. Seven of the 32 states (including D.C.) that expanded Medicaid have provisions that immediately repeal the expansion if the federal government decides to foot a smaller portion of the bill, as the AHCA proposes starting in 2020. The other 25 would have to come up with the difference in cost, or shrink or shut down the expansion, even if people still qualified under the frozen expansion.

How the government pays for the entire Medicaid program, not just the expansion, would also change. The federal government has historically paid for a percentage of whatever states’ Medicaid programs cost. The GOP bill would cap how much states could be reimbursed per participant, based on how much states spent in 2016. A cap would mean that when program costs go up, states would either have to reduce coverage or come up with funds to offset the costs. A recession, a disease outbreak or the release of a new, expensive drug (or a price increase to an existing one) could force states to ration coverage or health care if they don’t get additional funding from Congress.

People who don’t get insurance from their employer or a government program

Rallying cries against the Affordable Care Act often focus on the individual mandate, a provision that requires most people to have insurance or face a penalty come tax time. The House bill would get rid of those penalties, effectively getting rid of the individual mandate in the process. Since that change would be retroactive, it could cause major disruptions next year for the people who buy insurance on the already struggling health insurance marketplaces created by the ACA. If the people who are enrolled shifts as a result of a change in the individual mandate, the estimates that insurers make to determine costs will get thrown off balance, which could lead to higher premiums. In the individual mandate’s place, the AHCA calls for insurers to apply a 30 percent surcharge to insurance premiums for a year for people who go without insurance for more than two months.

A major point of contention for Republicans trying to replace the ACA has been whether to help people pay for their insurance coverage. The most conservative arm of the party is against these subsidies, saying they amount to yet another entitlement program. Meanwhile, more moderate Republicans have expressed concern over the millions of constituents who could end up without coverage if they don’t have help to pay for it. Several earlier GOP replacement proposals, including one championed by Health and Human Services Secretary Tom Price, called for age-based tax credits. The House bill provides for credits that are based on age, but capped based on income, and raises the financial ceiling for who would be eligible.

Still, the credits would provide less help than they do under the current law for most people, particularly those with low incomes. A calculator from the Kaiser Family Foundation, a health policy research organization, shows how that works. The subsidies also wouldn’t vary depending on the prices in local insurance markets, as they do with the ACA. That means people in states or areas where plans are relatively inexpensive, like New Mexico, would get the same credits as someone in rural Alaska, one of the most expensive areas for insurance in the country. However, the bill would open up what kinds of insurance plans can be sold by, among other things, allowing for cheaper plans that provide only catastrophic coverage.

Insurers still wouldn’t be allowed to deny coverage based on a person’s pre-existing conditions, as they could before the ACA, which makes the subsidies discussed above all the more important. Part of the reason that premiums rose so much the last couple of years for people who buy insurance on the marketplaces set up by the ACA is that people used more health care than expected, and fewer young and healthy people signed up than was hoped. Having people who need less care pay into the insurance pools helps balance out the costs of people with more medical needs. If insurers must still cover everyone with pre-existing conditions, those young and healthy people will still be needed to keep premium prices down for everyone else. Low-income people who are young and healthy could have even less incentive to obtain insurance under the proposed plan, which offers them fewer credits, even though insurers would be allowed to charge them less compared with the rates adults get under the new legislation.

People with employer-sponsored insurance

As with the ACA, there are fewer changes directly affecting employer-sponsored coverage in the AHCA than there are for the two groups above. Employers would no longer have to provide insurance to full-time employees, as the ACA requires. The so-called Cadillac Tax, which taxes employers on their most generous health insurance plans, would still kick into effect, but not until 2025.

Of course, the many facets of our complicated health care system are linked. Changes to the ACA marketplaces and Medicaid will apply pressure on other parts of the system, including employer-sponsored insurance. It’s hard to know what exactly those changes will be, but the CBO estimates will be a helpful starting point.

Anna Maria Barry-Jester is a senior reporter at Kaiser Health News and California Healthline, and formerly a reporter for FiveThirtyEight.