Health

House GOP releases bill that would replace Obamacare taxes and penalties, keep some subsidies

House Speaker Paul Ryan is leading efforts to repeal and replace the Affordable Care Act.
House Speaker Paul Ryan is leading efforts to repeal and replace the Affordable Care Act.
Allison Shelley/Getty Images

After years of waiting, it's finally here.

The Republican plan to reshape the Affordable Care Act — what they call "repeal and replace" — kills the requirement that everyone buy health insurance and eliminates the tax penalty for those who don't buy coverage. It also makes significant changes in the financial assistance people can receive to buy a health plan.

The bill would offer tax credits, refundable in advance, to people with incomes below $75,000. But those credits will be lower in many cases than the subsidies now offered in the ACA.

The bill, which will go through many revisions and challenges, was released late Monday by two House committees, Ways and Means and Energy and Commerce. Members are expected to start voting on parts of the bill Wednesday.

It will ultimately need approval by the full House and the Senate before it goes to President Trump for his signature. Until then, most of what is known as 'Obamacare' will stay in place.

But it's far from clear that Republicans in the House are unified in their support of the bill. Members of the far-right Freedom Caucus have said they oppose giving tax credits to people who don't pay any federal income tax. And only a few Republican defections in the Senate could defeat the bill.

Four Republican Senators wrote a letter to Majority Leader Mitch McConnell saying they were concerned an early draft of the House plan would not adequately protect people who have insurance through Obamacare's Medicaid expansion. And Senator Rand Paul was among three conservative Republicans who criticized an earlier version of the bill as "Obamacare lite."

Under the proposed bill, tax credits would start at $2,000 a year for individuals under age 30, rising to $4,000 for those of 60. The proposal, first seen in Feb. 10 draft of the bill, has been criticized as too meager to cover the full cost of a health insurance plan that provides full benefits.

But the proposed tax credit could potentially pay for insurance that protects only against a catastrophic health event.

Tax credits would begin to be phased out at incomes of $75,000 for individuals and $150,000 for families.

To encourage people to buy coverage, the plan allows insurers to charge a 30 percent penalty to people who let their insurance lapse, and then try to buy a new policy.

In states that expanded Medicaid, people who are eligible can continue to enroll until January 1, 2020, and those states would continue to benefit from the federal government paying a greater share of the health costs of those beneficiaries.

Several taxes contained in the ACA would be repealed at the end of this year. These include taxes on health insurers, pharmaceutical and medical device manufacturers, and a tax on high-cost employer-sponsored group health plans (aka Cadillac plans).

The plan offered by the House Republicans falls short of the outright repeal that has been demanded by more conservative members, including those in the House Freedom Caucus.

That could be due to the shift in public attitudes toward the ACA in recent weeks.

Public opinion has grown more favorable as major changes appeared imminent. A Kaiser Family Foundation tracking poll in late February found 48 percent having a favorable opinion versus 42 percent viewing the law unfavorably. Kaiser says the shift is due largely to a change in the view of political independents, among which 50 percent now view the law favorably.

California State Sen. Ed Hernandez, chairman of the health committee, blasted the legislation.

The proposals to replace premium subsidies with tax credits and eventually end the Medicaid expansion (Medi-Cal in California) "is sort of like reverse Robin Hood," he said. "Instead of stealing from the rich and giving to the poor, they’re going to steal from the poor and give to the rich."

Under the GOP plan, "we will see higher out-of-pocket costs, more people without insurance, and much less comprehensive coverage for those who manage to keep their insurance," Hernandez said.

Anthony Wright, executive director of the consumer advocacy group Health Access California, also slammed the Republicans' legislation.

"This isn't repeal and replace, but repeal and destroy coverage for millions of Californians," he said. The end of the Medicaid expansion would mean the loss of some $8 billion in Medi-Cal funding in 2020, and billions more in the future, imperiling coverage for millions, said Wright.

He predicted that hundreds of thousands of low-income people would no longer be able to afford individual health plans with the tax credits proposed in the bills, while "the rest of us would be left in a smaller and sicker insurance pool - spiking premiums significantly and leading to additional uninsured Californians."

The California Medical Association said it’s still reviewing the bills. It has previously issued a set of principles that includes a call to: protect funding for Medi-Cal; ensure that Californians don’t lose health insurance, and make sure that coverage is affordable, especially for low- and moderate-income families.

A spokeswoman for Covered California, the state's health insurance exchange, said the agency is still reviewing the Republican measures.

The House bill would also eliminate federal funding for Planned Parenthood. The organization’s California chapter says that would take away $260 million a year - about 80 percent of its operating budget. If the federal support is eliminated, the group has said that it might ask the state legislature to make up the difference. 

This story has been updated.

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