Trumpcare Health Insurance
It is common for the President in office to sign an executive order to freeze previous administration’s programs that are in progress. This allows them to quickly move in the direction of the new administration’s goals.
On May 7th, 2017, the U.S, House of Representatives passed the American Health Care Act (AHCA), now popularly known as Trumpcare. This impacted aspects of execution of Affordable Care Act (ACA) which was also called Obamacare. Here is what Trumpcare changed in the world of American medical care.
• Individual Mandate Eliminated
The ACA mandated that every American needs to buy insurance or pay the individual shared responsibility penalty. This mandate came into effect in 2014 and restricted the insurance companies to alter the insurance rates based on the current health of the individual when buying a plan.
Trumpcare repeals the individual mandate and instead allows insurance companies can charge 30% penalty if a person buys an insurance after a gap of no coverage for more than 63 days. This incentivizes people to buy an insurance than mandating them to buy one.
It is worth noting that the Trumpcare repeal of individual mandate does not take effect until 2019. This means, individual mandate continues to be in effect until the end of 2018 and not having a health insurance may attract steep fines.
• Tax Credits Replace Income-based Subsidies
Obamacare provided subsidies for qualifying low and middle-income individuals to pay their insurance premiums. For eligible Americans whose benchmark plan costed more than a certain percent of their total annual income, Obamacare gave subsidies on the difference amount.
Trumpcare on the other hand provides subsidies based on age, instead of income like Obamacare does, with an increase of $500 with every age bracket. People over 60 get $4000 tax credits.
Under Trumpcare, elderly will have higher starting premiums and so will have to pay higher premiums. On the other hand, younger people who live in low cost areas but are in high-income bracket will have to pay low premiums given they would have lower starting premiums in general.
Click here for interactive maps that show the difference in premium payments under Obamacare and Trumpcare by state.
• States Can Change ‘Essential Health Benefits’ by Obtaining Waivers
Obamacare federally imposed a set of minimum benefits that all health insurance policies should cover. These essential benefits cover the following 10 categories:
1. Outpatient services (also called the Ambulatory patient services)
2. Emergency services
3. Hospitalization
4. Maternity and new born care
5. Substance use disorder services, mental-health services and behavioural health services
6. Prescription drugs
7. Rehabilitation services
8. Laboratory services
9. Preventive and wellness services including chronic disease management
10. Oral care, vision care, and paediatric services
Trumpcare removes the mandate for the insurance companies to comply with these essential health benefits coverage. Instead of prescribing a list of mandatory services, Trumpcare attempts to reduce health care costs by allowing states to define their own minimum benefits.
• Allows Insurers to Charge More for Pre-existing conditions
A pre-existing condition is a medical condition that a person was diagnosed with before buying an insurance policy and the benefits went into effect.
Obamacare ensured people with pre-existing conditions can buy medical insurance without an underwriting, can’t be denied insurance coverage, and were protected from being charged more by the insurers. One way this was misused was that people violated individual mandate as paying fines was cheaper than paying regular insurance premium. When there was a need for medical insurance cover, the provision for pre-existing condition allowed them to buy insurance after being diagnosed by a medical condition at affordable costs.
Trumpcare takes a different approach to pre-existing conditions. It provides for waivers that can allow insurers to charge more for pre-existing conditions encouraging individuals to buy insurance plans regularly. Given that this higher charge for pre-existing conditions applies only when there is a gap of no coverage, it further encourages continuous coverage.
• Obamacare Medicaid Expansion Rolled Back
Medicaid is a joint effort by federal and state governments to provide cover for medical costs for people with limited income (at or below 138 percent of poverty).
Obamacare has a provision that calls for expansion of Medicaid eligibility bringing more low-income people under coverage. Under Obamacare, the federal government bears most of the cost of Medicaid with a small portion being contributed to by the participating states.
Changes under Trumpcare for Medicaid expansion are based on a long history of Republican opposition of Medicaid expansion. Trumpcare allows people with existing Medicaid coverage to keep it. However, starting in 2020, there will be a freeze in future enrolments. At that point, states won’t be getting any funding from the federal government to support new signups.
Another significant change from Obamacare is that under Obamacare, states had the freedom to choose how much they would spend for qualified benefits and the federal government is obliged to match the state expenditure at the state matched rate. Trumpcare will be changing this by enforcing a cap in state spending and also creating defined categories for the spend.
• Changes to Health Savings Account (HSA)
HSA is a medical savings account that provides federal tax benefits for people who are eligible and want to contribute to it.
Under Obamacare, the cap for individual investments in HSA is $3,400 and cap for families is $6,750. Trumpcare increases the cap to $6,550 for individuals and $13,100 for families.
In order to fund for the costs of Obamacare, there are a list of consumer taxes that were included – Health savings accounts tax, indoor tanning tax, high bills tax, tax on several prescription drugs, high risk tax, etc. Trumpcare eliminates all of these taxes.
Given the changes to health care impacts every American, it is important to understand how all of this affects you specifically. If you are keen to evaluate what actions you need to take and are looking for expert advice to evaluate your specific case, feel free to give us a call and one of our expert agents would be happy to walk you through the details.