Independent Health is closely following efforts by President Donald Trump and the Republican-controlled Congress to repeal and replace the Affordable Care Act (ACA) and will keep our customers up-to-date on developments. We provide this latest overview in our occasional series of ACA updates.

January 23, 2017 Update:
Inauguration Day and Next Steps in the ACA Replacement Plan

Donald J. Trump took the Oath of Office and became the 45th President of the United States of America on January 20, 2017 and that evening signed an executive order to seek the prompt repeal of the ACA. The executive order calls on federal agencies to “waive, defer, grant exemptions from, or delay” implementation of any health care law provision that imposes burdens on states, health care providers, insurers or individuals. It is important to note however that the order allows state flexibility in health care law implementation. The order does not repeal any existing rules but calls on agencies to initiate regulatory action to make changes.

Congress will continue to develop reconciliation legislation that could repeal provisions of the ACA that impact spending and taxes. Reconciliation provides an easier path to repealing the law, as it opens the door to changing the law via a simple majority vote in the Senate, requiring 51 votes rather than the normal 60 votes.

Although there is uncertainty on when this will be rolled out, local Congressman and Congressional Liaison to the Trump Administration’s transition, Chris Collins, in a recent interview (Activists urge Collins, GOP not to repeal Obamacare unless replacement plan is ready, WBFO/NPR, Jan. 18, 2017) indicated the actual implementation of a replacement plan will likely occur in 2019. This slower approach would bring some short-term stability to the uncertainty surrounding the health care industry, as health plans need to begin the intricate process of developing 2018 products, benefits and premiums, which they must file for approval to the state and federal governments by June.

As the President and Republican-controlled Congress consider alternatives, proposals to replace the ACA will have to address key components, such as:

  • Access and Affordability
  • Individual mandate
  • Taxes and penalties
  • Medicaid expansion
  • Marketplace
  • Delivery system reform
  • Medicare
  • Drug costs

Each issue of the ACA Update will revisit a key provision from the ACA that will likely be repealed as part of the process to replace the ACA. This Update covers the individual mandate.

The Individual Mandate
The original goals of expanding access to health insurance while lowering costs have always been in conflict and will need to be addressed as part of any replacement plan.

Under the ACA, everyone is required to purchase health insurance if they do not get insurance through their employer, or qualify for Medicaid or Medicare. Anyone who does not purchase insurance and does not qualify for a hardship exemption, incurs a tax penalty of $695 per person and $347.50 per child, up to $2,085 or 2.5 percent of your household income, whichever is greater.

The individual mandate encourages younger and healthier individuals to purchase insurance. This is important because it helps balance risk and more evenly distributes costs. Without a mandate (or some sort of penalty and/or strong incentive) to get coverage, only those who need insurance will most likely purchase it, which will drive up costs significantly.

Prior to the ACA, individual plans in New York state cost more than $1,500 per month, which is more than 50 percent higher than individual plans currently offered on the NYS Exchange. As a result of the law, the number of individual plan members in New York has grown from about 20,000 before the ACA to more than 2.8 million today.

As a replacement plan is being developed, legislators must think about how they will ensure young and healthy people purchase coverage and whether an incentive or penalty is the best approach, and how best to make certain that individuals maintain continuous coverage.