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American Healthcare Act – CBO Details Reveal Flaws

The passing of a little time and a review of the CBO scoring of the American Health Care Act indicates that this bill is not ready for passage.

  Anyone in the healthcare industry with a broad vertical understanding of the processes knows that the current system we have needs improvement. The argument comes in defining what is an "improvement". At first glance, the American Healthcare Act looked to be a bill that centrists could get behind. After study and CBO scoring, some of the issues call for further review.

1) Conservatives seem to be a lot quieter now that CBO says that this cuts $1.2 trillion in spending with $337 billion in deficit reduction.

  2) I have some issue with the assumption that approximately 14 million less people will have insurance in 2018 than currently. I do not believe that by removing the tax for being uninsured will result in 5 million, currently covered under Medicaid, to not take the coverage. I do not believe that 6 million will voluntary drop individual coverage since the fine is $0 instead of 2.5% of your income. If those on Medicaid wont take assistance, I don't think I need to threaten them with a tax to get them to comply. Those on private insurance who decide not to take coverage are generally facing 12-month premium penalties that are significantly higher than the 2.5% tax. According to the CBO, lower premiums and broader subsidies will bring 7 million of those not on Medicaid back to the market in the 2020-2026 timeframe.

3) Of the 24 million estimated to be uninsured due to AHCA, 16 million would happen by 2019. This calculation seems flawed since existing subsidy and cost sharing would remain during this period and new credits would actually add $57 billion to the deficit in this same period as compared to existing ACA. (CBO Table 1, page 29)

4) After reviewing details from the CBO, I do find one detail that is expected to deter Medicaid enrollment to be an intentional block to those that need coverage. Under the new AHCA, Medicaid recipients would be required to requalify their income every six months versus the current, every 12 months. In addition, once re-qualified, if coverage has expired, the coverage will only be retroactive for 30 days, as opposed to the current 90 days. It is not unusual for Medicaid applicants to wait 60-120 days for completion. It is burdensome and unrealistic to make those least able to provide data, the most monitored group of reciepients and leave members potentially with gapped coverage. The State Stabilization funds can be used to speed up the process, but I find the use of funds to administer rather than provide assistance, inefficient use of dollars. A coverage gap due to burdensome and repetitive data requirements, along with a 30% penalty for the gap could end up being another deterrent to rise out of poverty and off the roles of assistance.

5) Lower income seniors (55+) FPL 150%-250%. While they may have received an inordinate amount of subsidy help under the current ACA, they cannot, as a group, be the new group of uninsured's. As it stands under AHCA, these lower income seniors will see not only higher costs, but the elimination of cost-sharing reductions in deductible and coinsurance while their premiums ascend because of the new 5-1 ratio of pricing. This group needs additional considerations.

6) Although the 30% penalty for not having insurance is a solid idea to use market forces to encourage participation, there are elements that would be encouraging those to remain uninsured. a) The rule also applies to small group markets. This would be burdensome and expensive for small groups to track who does and does not have insurance. b) Those who may be late with paperwork to requalify with Medicaid , or if their State was inefficient would be charged premium they could not afford.

With $337 billion in savings, lower premiums for those under 50, expanded tax credits for all, according the CBO, a more stabilized market, all while maintaining some of the best features of the ACA (No Pre-ex, Children to Age 26) there seems to be a window of opportunity to make some tweaks to make the bill more palatable. For me personally, this bill is currently a no-go, if only for the Medicaid qualification and time-table burden.

Look to MrHealthinsurance.com for independent commentary and information about health insurance and reform.

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