In early May, the U.S. House of Representatives passed a plan–on its second try–to replace the Affordable Care Act. The American Health Care Act contains several provisions that give states and ultimately the insurance companies they regulate flexibility in what healthcare coverage looks like.
The word “flexibility” is key here. When federal lawmakers give states and insurers “flexibility,” consumers may be negatively impacted by losing key protections that were previously in place. According to the Wall Street Journal, a provision in the bill* could negatively impact roughly 50 percent of Americans who get health insurance through their employers. Here in the Dallas–Fort Worth area, that’s more than 3 million people.
A typical corporation with, say, 10,000 employees in DFW pays approximately $1.3 million each year for its employee health insurance. Under proposed legislation, a state could obtain a waiver from existing ACA regulations that currently require it to cover 10 essential health benefits. These benefits cover: emergency services, prescription drugs, ambulatory patient services, hospitalization, laboratory services, maternity and newborn care, pediatric services including dental and vision care, mental health and substance abuse services, preventive and wellness services, and rehabilitative and habilitative services and devices. No matter what type of health insurance you have, federal law now requires these benefits to be covered.
Under the AHCA, states that apply for a waiver would likely see insurance companies offer more policy options, some with fewer benefits and lower premiums. For example, insurers could offer policies that have annual and lifetime benefit limits, which are currently banned under the Affordable Care Act. This could be viewed by some employers as an attractive way to save money.
Employers could shave thousands off the cost of healthcare by dropping just one essential health benefit. Alternatively, they could cap the amount paid on a benefit or impose limitations–for example, limit the number of doctor visits or days covered in a hospital. Or they could pay only for generic pharmaceuticals, not name-brand drugs.
Just by paying for only generic drugs an employer could save an estimated 5 to 7.5 percent of its annual healthcare bill. Given the ability to tweak the basket of covered healthcare services, an employer easily could save 10 percent simply by reverting to covering what it typically covered before the ACA.
Health insurance contains three kinds of cost-sharing that impact employees: deductibles, co-pays, and co-insurance. The Affordable Care Act limited the maximum amount consumers pay for these out-of-pocket expenses. For 2017, the maximum out-of-pocket costs for a federal marketplace plan is $7,150 for an individual plan and $14,300 for a family of four. By contrast, the proposed legislation could allow insurers to dramatically increase or even remove these out-of-pocket limits. If this approach passes, employer premiums could be dramatically reduced as a result of increasing out-of-pocket fees employees pay if they use a substantial amount of healthcare services.
Another provision of the bill would allow employers and insurers to use standard benefit plans offered in another state. That is, a Texas employer wouldn’t necessarily have to offer a plan based on Texas’ standard plan of benefits. Theoretically, if another state’s standard plan had 20 percent fewer benefits, an employer could choose that plan and still comply with the new legislation as regards the level of minimum benefits that must be offered to employees.
The measure now moves to the Senate, where lawmakers are likely to heavily revise it, removing and changing provisions to create their own version of the bill. The process is expected to take many weeks–keeping in mind the Senate adopted the Affordable Care Act after approximately 100 hearings and 25 consecutive days of debate.
* Section 136 of the American Health Care Act, “Permitting States to Waive Certain ACA Requirements to Encourage Fair Health Insurance Premiums.”
Dave Dillon is vice president and principal at Lewis and Ellis–Actuaries and Consultants Inc., a consulting firm based in Allen. An expert on the Affordable Care Act, he specializes in health insurance and advises states and companies on risk assessment, design, implementation and pricing of new programs to cover uninsured populations.