The Stakes of ACA Repeal

Replacing ACA: What You Need to Know About the ACHA
Proposed plan cuts coverage for millions, cuts taxes for wealthiest by billions —
all while making care more expensive for poor and rural Iowans

March 16, 2017

Congressional Republicans have proposed replacing the Affordable Care Act, known as Obamacare, with the American Health Care Act, or ACHA. In a nutshell, the House Republican plan takes away coverage from 24 million people to help pay for $600 billion in tax cuts primarily for the wealthiest Americans, as well as drug and insurance companies. Here’s what it would mean:

The ACHA would cause 14 million Americans to lose coverage next year, with that number rising to 24 million by 2026. The Congressional Budget Office projects that the plan would eventually wipe out all of the coverage gains under Obamacare.

The House bill would reduce federal funding of the Medicaid expansion, potentially throwing 150,000 Iowans back into the ranks of the uninsured. Those covered by the Medicaid expansion are mostly non-aged adults working in low-wage jobs without benefits.[1]

The House plan hits rural areas of Iowa and older Iowans much harder because health insurance is much more expensive in rural areas and for older residents and their plan provides the same credit regardless of the costs a family faces. For a family of four with $40,000 income, the average loss of credit is $3,469 in one of Iowa’s 29 metropolitan area counties, vs. nearly $8,000 in the remaining rural counties. For a 60 year-old couple with no children and $25,000 income, the plan would mean an average loss of $11,300 in credits in urban counties in Iowa, and $17,236 in rural Iowa.

The House bill would also end traditional Medicaid as we know it, replacing it with a fixed per capita grant to the states. This would increase costs to the state of Iowa and/or force the state to cut back benefits or eligibility. It would also leave Iowa with no way to deal with the increased need for Medicaid that arises during an economic downturn.

The House bill eliminates the ACA credits, which are more generous the higher are a family’s insurance costs, and the lower their income. Instead, the House bill creates much lower credits that are the same in high cost places as in low cost places, and which are much more generous than the ACA for higher income consumers and much less generous for lower income consumers.

The average tax credit for someone purchasing health insurance on the Iowa exchange in 2020 is projected to fall 45 percent, from $5,526 to $3,015. [2]

• While the House plan eventually phases out the credits at high income levels, many households with income several times the poverty level would be eligible who are not eligible under the ACA, and would receive the same credit as a family in deep poverty.

• While proponents may tout the slight decline in the sticker price of health insurance projected by the CBO under their plan, the net cost of insurance after tax credits will still be substantially higher for lower income Iowans. [3]

• The drop in average premiums projected by the CBO is not due to declining costs of health care, but rather from the sharp increase in health insurance costs for older persons. For many, insurance will become simply unaffordable, forcing them to drop out of the insurance market. By having to cover fewer older, high cost individuals, insurance companies can lower average premiums. But the lower average comes about by lowering premiums substantially for the young, while actually raising them for someone nearing Medicare eligibility.[4]

Insurance coverage would be skimpier under the House plan, with higher deductibles and co-pays. Thus individuals who can still afford to purchase insurance would have the lower premiums offset by higher out-of-pocket costs, contrary to the President’s promise that repeal would bring about “much lower deductibles.”[5]

•The House plan would repeal two ACA Medicare taxes that fall only on individuals with incomes above $200,000 ($250,000 for married couples). The 400 highest-income taxpayers would get annual tax cuts averaging about $7 million each. These taxpayers, whose annual incomes average more than $300 million, would receive tax cuts totaling about $2.8 billion a year. [6]

[1] The federal government currently covers 90 percent of the cost of the Medicaid expansion. The ACHA limits the federal funding starting in 2020, and it is unlikely the state could or would come up with state revenues to replace that, resulting in the eventual end of the expanded coverage.
[2] Aviva Aron-Dine and Tara Straw. House Tax Credits Would Make Health Insurance Far Less Affordable in High-Cost States. Center on Budget and Policy Priorities. March 9, 2017.
[3] Jacob Leibenluft. CBO: Millions Would Pay More for Less Under House GOP Health Plan. Center on Budget and Policy Priorities, March 13, 2017.
[4] Leibenluft (see above).
[5] Leibenluft (see above).
[6] Chye-Ching Huang. House Republicans’ ACA Repeal Plan Would Mean Big Tax Cuts for Wealthy, Insurers, Drug Companies. Center on Budget and Policy Priorities. March 8, 2017.