The American Health Care Act: How it compares

Brendan Jacques
Connector Editor

On Friday, March 24, Republican Speaker of the House Paul Ryan announced that the American Health Care Act was being withdrawn from Congress without a vote. The bill was designed as a replacement for the Patient Protection and Affordable Care Act, which is more commonly known as “Obamacare.” Republican leadership opted to withdraw the bill after opposition from conservative party members made it clear that it would not receive the necessary votes to pass through the House.

To explain what the American Health Care Act was attempting to accomplish, it is important to understand the main problem with The Affordable Care Act that the new bill is trying to fix: the rapidly ballooning price of insurance premiums for programs that comply with the law. Under the current system, insurance companies are not allowed to deny coverage to potential customers because of pre-existing medical conditions, which results in those companies losing revenue from needing to pay for more claims then they would have with an overall healthier clientele.

To make up for this, companies usually increase the premiums for their insurance coverage for all customers. That way, the money they receive from their healthier clients can be used to pay for the customers that need the coverage. This model is further supported by the individual mandate, which requires all U.S. citizens to be applied for a health care plan, further increasing the number of healthy customers paying and, in theory at least, decreasing overall premiums for everyone in the system.

An issue with this system is the people providing a majority of the money supporting it are the ones that benefit the least from it. This model also does not consider the naturally rising cost of medical equipment and drugs. While the Affordable Care Act does provide government-funded subsidies to lower-class insurance holders to offset these costs, customers that are not eligible for these subsidies have to pay out of pocket for the increasing costs.

This problem is further compounded by the law’s insistence that all health care programs purchasable through government websites, such as healthcare.gov, adhere to a list of essential health benefits, which restricts the types of health care plans available and allows insurance companies to increase premiums thanks to a lack of competition.

This is what the American Health Care Act appeared to be most concerned with fixing, though the way in which it would go about decreasing the cost of insurance premiums seems questionable at best.
The bill’s most publicized feature was the abolishment of the individual mandate, replacing it instead with a 30 percent charge on new insurance plans if the applicant has previously lapsed out of coverage.

This change comes alongside the removal of the essential health benefits provision, thus allowing insurance companies to flood the market with more barebones coverage plans. While this design would result in an overall decrease in insurance premiums and would give customers a greater degree of choice over the coverage they want, it could lead to inadequate coverage overall.

While the overall price of insurance premiums would technically decrease under the above system, the amount that premium insurance holders would have to pay skyrockets due to changes to how the government distributes tax subsidies. Under the new law, the current system, which grants subsidies that scale based on the recipient’s income and the overall cost of their healthcare plan, is replaced with one that gives a flat tax break based almost entirely on the age of the recipient. While this change theoretically gives older insurance owners more money to cover their medical needs, the size of those tax breaks in comparison to those given on average by the Affordable Care Act.

According to the Kaiser Foundation, the average premium price of the second lowest available plan that qualifies for the ACA’s Silver tier in Massachusetts is about $247 per month, or $2,964 annually. Under the ACA, this average price is steadily increased based on the age of the recipient, with patients over 64 paying triple the average amount, in this case around $8,892 annually.

If the patient receiving this health care plan has an annual income below 400 percent of the Federal Poverty Level (FPL), which is currently $11,880, then the patient will only be expected to pay an amount of that annual premium equal to a certain percentage of their annual income: 2 percent for those close to the FPL, to 10 percent for those at 400 percent of the National Poverty Level (NPL).

This means that, under the ACA, a customer over 64 years old with an annual income at 400 percent of the NPL (around $47,520) will pay $4,752 for their health insurance and save $4,140 in total. On the opposite end of the spectrum, the same customer with an income at 100 percent of the NPL ($11,880) will pay $237 for their health insurance and save $8,655.

The American Health Care Act would have given this same customer $4,000 in savings regardless of where their average income lies while also changing the average price scale by age from one that increases the average premium threefold ($8,892) to one that increases it fivefold ($14,820). Compared to that, these changes would make standard health insurance programs difficult for lower-class citizens and the elderly to reasonably afford.

This plan works to the benefit of those who can afford to pay for it. Since people living on the poverty line as well as the elderly often require medical services more than the wealthy and healthy, it stands to reason that the fewer of those people an insurance company needs to cover, the less money they would need to spend on insurance claims, decreasing the price of premiums overall. Because of this, there is no real incentive for the GOP to fix this issue since its outcome helps to support one of the key promises they made about the bill, even if those premium savings will not apply to nearly as many people as the Affordable Care Act.

The Affordable Care Act is a flawed health care law that requires improvement in order to make high medical expenses more palatable. However, the American Health Care Act does not appear to be an improvement of the law or even an effective replacement; it is a bill that, if passed, would have led to a health care system that would have benefitted the wealthy while denying support to the least fortunate on top of leaving behind almost all the problems Republicans had with the ACA in the first place.

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