The conservative complaint that the Affordable Care Act led to higher out-of-pocket costs has been so deeply ingrained into GOP Obamacare repeal talking points that even President Trump—he of “Nobody knew that health care could be so complicated” fame—managed to work it into his tweet storm messaging.
But like other aspects of the health care bill Republican lawmakers are currently pushing, their approach would likely make the problem they raised constantly to bash Obamacare actually worse.
The reasons are wonky but incredibly important, because consumers will likely see their deductibles and co-pays rise if the Senate health care overhaul bill, the so-called Better Care Reconciliation Act, goes into law. And the way the Senate proposal is structured, it also means that the tax credits offered under the GOP bill give consumers get significantly less bang for their buck, even as they largely follow the model of the ACA subsidies.
The key provision is the Senate bill’s proposal to change what is known as the actuarial value of the benchmark plans that the tax credits would be pegged to. Under the current law, the tax credits are formulated according to the second lowest premium rate for a “silver plan” in a given area, and silver plans are required to have a 70 percent actuarial value. That means that that the insurer will pay 70 percent of medical costs a typical consumer incurs, while leaving the consumer to pick up the tab for the rest via deductibles, co-pays or other cost-sharing mechanisms.
The Senate bill lowers this base level to 58 percent actuarial value, which is at the bottom end of what are known as “bronze plans” currently under the ACA. By the math of Kaiser Family Foundation vice president Larry Levitt, the value of the premium subsidies are therefore reduced by around 15 percent.
On the front end, this will make it look like premiums are lower under the GOP plan. But the reduction in actuarial value shifts that burden elsewhere, likely to co-pays and deductibles. Consumers on the older end of the spectrum will be hit especially hard by this change, due to other ways the Senate bill tweaks ACA limits regarding age and how the tax credits are doled out.
This tweak is coupled with a state waiver provision of the bill that will allow states to opt out of the ACA’s limits on cost-sharing.
A 2015 brief by the Urban Institute found that with plans at 60 percent actuarial value—the bottom limit at the time under the ACA—the out-of-pocket costs would shake out to be around $6,850 for single policies and $13,700 for family policies.
Under the ACA, at least those deductibles were defrayed for low-income consumers by insurer subsidies known as cost-sharing reduction payments. But under the Senate Republican plan, the cost sharing reduction payments will be repealed at the end of 2019, and it’s left up to the states to enact programs that could assist low income people with these deductibles.
There is a conservative philosophy that right-leaning health policy wonks will offer in favor of higher cost-sharing. They are argue that if consumers are exposed more directly to health care costs, they’ll be more selective about what services they receive, prompting market forces to drive down the prices.
This rationale was no where to be found when Republican lawmakers pointed to out-pocket-costs to slam Obamacare, even as they intended to push a plan that would only exacerbate that problem.
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