Analysis of the Better Health Care Reconciliation Act

Make no mistake this will impact you and your family. This is a critical issue as health care spending is 1/6 our annual domestic spending. The Senate promised a different health insurance plan than the House’s AHCA and they delivered with the Better Health Care Reconciliation Act (complete discussion draft here). You can read the Senate’s own Summary of the Discussion Draft.

The BCRA is not a repeal of the ACA, it is instead a collection of changes. While we were hoping for the best, that is not what the Senate delivered. And in a new Kaiser Health Tracking Poll – June 2017: ACA, Replacement Plan, and Medicaid – the results show that there is increasing support for the ACA and that a majority of Americans have an unfavorable view of the AHCA.

Here are the main areas that will be impacted according to the discussion draft with what the BCRA says and what it really means:

Pre-existing Conditions and Essential Health Benefit:

The BCRA Says: Preserve access to care for Americans with pre-existing conditions and allow children to stay on their parents’ health insurance through age 26. (There are no changes to current law as it applies to Veterans, Medicare, or Social Security benefits.) Guarantees children with medically complex disabilities will continue to be covered and would be exempt from the per capita cap.

States could apply for waivers from many of the insurance regulations to decide the rules of insurance and ultimately better allow customers to buy the health insurance they want.

What this means: States will be able to set up plans with their own definitions of essential benefits, that could exclude coverage for prescription drugs, mental health, addiction and other expensive benefits such as maternity coverage. Governors would be allowed to lower coverage standards without approval from their state legislatures. Here’s how Promises Made To Protect Preexisting Conditions Prove Hollow. Check here to see if you or a family member has a pre-existing condition.

Bottom Line: You may be able to get insurance, however, your insurance may not cover what is medically necessary for you such as chemotherapy and insulin. Insulin is too expensive already.

Affordability & Coverage:

The Better Health Care Reconciliation Act Says: Improve the affordability of health insurance, which keeps getting more expensive under Obamacare.

What this means: Well, technically correct, it is not true. Plans will offer less benefits with higher deductibles. Because, If You Love High Deductibles, Then You’ll Love The Senate Health Bill

What the BCRA says: The “actuarial value” — the amount of the medical costs that insurance would have to cover — would be lowered to 58 percent, down from 70 percent for the ACA’s benchmark plans. That’s likely to reduce the value of the tax credits.

What this means: This means that you will be expected to pay more out of pocket.

Older enrollees will see their premiums sky-rocket. Under the ACA, insurers could only charge an older person (50’s and early 60’s) up to three times more than younger people, however, under the AHCA and BCA, insurance companies would be able to charge five times more.

This does not get at the true reasons why health insurance is so expensive. The real reasons are unbalanced pricing of medical services, exorbitant costs of medications, health care fraud among others. If these expenses are not addressed, health insurance is always going to be expensive because health care is expensive.

Remember, that for the most part health insurance is an intermediary that pays health care costs and charges a fee for doing so. Insurance is a risk transfer pool where policyholders pay a premium and then if something happens, they file a claim – the idea is that this pooling of money offsets years where you have a large claim. For example, you may go for years being perfectly healthy with minimal health care costs and then you get cancer and incur health care costs of $100,000. This $100,000 must be paid for somehow, the insurance companies are not performing magic, they must collect more money in premiums than they pay out in claims and in years where claims are not high, they save money in what are called reserves. And hopefully, the reserves are enough for a year in which an insurance company has much higher than normal claims.

Subsidies Would Be Changed:

What the BCRA says: Subsidies would be tied to plans with higher deductibles. Subsidies would be scaled back if they cost more than 0.4% of the gross domestic product.

What this means: Under the ACA, subsidy payments are based upon the price of the second-lowest tier plan (silver) in your area. The BCRA would link subsidies to the lowest tier (bronze) which have higher deductibles. So technically, since premiums are lower, this looks good, until you figure out your total annual out-of-pocket costs. With the GDP link, that could mean reduced subsidies.

Individual and Employer Mandates:

The Better Health Care Reconciliation Act Says: Repeals the individual and employer mandates.

What this means: Individuals would no longer be required to have health insurance. Employers would no longer be required to provide affordable coverage. The mandates are designed to help keep the marketplace stable. Bringing healthy people into the health insurance pool before they are sick allows the insurance companies to build up reserves. If only sick people have insurance costs will be higher, just like if the only homeowner’s policies were on houses that were on fire.

Tax Credits:

The BCRA Says: Kept in place, unlike AHCA. Targeted tax credits will help defray the cost of purchasing insurance; these advanceable and refundable credits – adjusted for income, age and geography – will help ensure those who truly need financial assistance can afford a health plan.

What this means: Value would be reduced since it would be tied to the cost of health insurance with reduced benefits. After 2019, they’d only be available for people with incomes up to 350 percent of the poverty line.

Cost-Sharing Reductions:

The BCRA Says: Continues federal assistance – through 2019 – to help lower health care costs for low-income Americans in the individual market.

What this means: Only in place for 2 more years. There is no actual funding provided for this and this money that the Government already owes insurance companies and that the House has refused to pay

Medicaid Spending Limits:

The Better Health Care Reconciliation Act Says: Provides Flexibilities for Governors: Allows states to choose between block grant and per-capita support for their Medicaid population beginning in 2020, with a flexibility in the calculation of the base year. Allows states to impose a work requirement on non-pregnant, non-disabled, non-elderly individuals receiving Medicaid.

What this means: Medicaid spending will be limited to a set amount person rather than the current open-ended funding agreement. In other words, in years where there are high claims, there won’t be more money to cover those claims. This would also be tied into general inflation rates rather than the medical rates which are higher and are the actual rates that should be tracked.

End of Medicaid Expansion:

The BCRA Says: Strengthen Medicaid for those who need it most by giving states more flexibility while ensuring that those who rely on this program won’t have the rug pulled out from under them.In 2021, begins gradual reductions in the amount of federal Obamacare funds provided to expand Medicaid, restoring levels of federal support to preexisting law by 2024 while providing fairness for non-expansion states.

What this means: This limited spending on Medicaid for low-income people phases out the popular Medicaid Expansion and would result in coverage losses for millions.

Tax Repeals:

The BCRA Says: Repeal costly Obamacare taxes that contribute to premium increases and hurt life-saving health care innovation, like the taxes on health insurance, prescription drugs, medical devices, and “high-cost” employer-sponsored plans. All ACA taxes would be repealed except for the “Cadillac tax” for generous plans, which would be delayed.

What this means: This is a tax transfer to the wealthy. The ACA plan’s tax increases on the wealthiest Americans helped pay for the plan. A core value of America has been the redistribution of wealth.

Market Stabilization:

The Better Health Care Reconciliation Act says: It will help stabilize collapsing insurance markets that have left millions of Americans with no options:

What this means: Insurance companies are facing uncertainties with payment of cost-sharing subsidies along with overall health insurance market uncertainty making it hard for insurance companies to charge an appropriate premium. The “Obamacare is in a Death Spiral” is self-inflicted by our legislators. See Killing Me Softly (with his song).

Winners: The biggest winners under the GOP bill would be young people who don’t use much health care and the wealthy. Those consumers would no longer face a penalty for going uninsured. They’d get bigger subsidies than they’re getting now. And the broader shifts in the healthcare market would favor people who don’t need to use it. The wealthy would be rid of the taxes from the ACA.

Losers: Older people, sick people and poor people. Although the bill phases in its Medicaid cuts more slowly than its House counterpart, once they took effect, the Senate’s cuts would be deeper. And in the individual insurance market, older consumers would see their financial assistance shrink.

What’s Next:

The CBO will score the bill over the weekend and Senate Majority Leader Mitch McConnell is planning for a vote late next week. The CBO analysis on the AHCA indicated that 23 million fewer people would be insured by 2026.

For those of us who follow sports, we are familiar with the “magic number” which is the number of wins for the team we’re rooting for or the number of losses by the closest competitor. In this case, the “magic number” that Senator Mitch McConnell needs to ruin the health insurance for millions of Americans is 51. For the Republican supporters of their Health Care Bill, if they don’t get to 51, it doesn’t pass. Vice-President Mike Pence can break a tie. Since the Senate (and House) are shoving this through under the reconciliation process, they only need 50 Senate Votes and given that there are 48 Democrats and 52 Republicans in the Senate and knowing that no Democrats will vote for this Bill, only 3 Republican Senators need to vote No for this Bill to fail.

As of this morning, Four GOP senators say they can’t vote for current Republican health care bill. However, as we learned with the House and how Speaker Ryan snuck the American Health Care Act through after saying he was done with Health Care is that even if there is no vote next week or there are not 51 yeas, this is most likely not going to go away anytime soon. Which means those of who like our health insurance just fine are not going to sleep well. If it passes, the House and Senate would need to work out their differences and vote again on. Then the Bill would need to be signed by President Trump.

Speaking of Trump, he may be confused, as he tweeted yesterday: I am very supportive of the Senate #HealthcareBill. Look forward to making it really special! Remember, ObamaCare is dead. Apparently, he’s not clear that the BHCA is not a repeal of the ACA, it is a series of modifications, so the BHCA is not going to make it dead, it will just change it. Or perhaps he forgot that Obamacare is a nickname for the ACA. At this time, it appears that he does not view this bill as “mean”. Though he did not initially view the AHCA as “mean” until recently. Perhaps once Trump takes a closer look he will see that the BHCA probably meets the standard for being “mean”.

Apparently, he’s not clear that the BHCA is not a repeal of the ACA, it is a series of modifications, so the BHCA is not going to make it dead, it will just change it. Or perhaps he forgot that Obamacare is a nickname for the ACA. At this time, it appears that he does not view this bill as “mean”. Though he did not initially view the AHCA as “mean” until recently. Perhaps once Trump takes a closer look he will see that the BHCA probably meets the standard for being “mean”.

The Affordable Care Act does need some modifications and is not perfect. However, the American business world now lives by the concept of a Minimal Viable Product “MVP” rather than a fully finished product where we all act as testers and then the MVP edition is improved. We should think of the ACA as an MVP, something that is being tested and improved. The key word here is improved and my thinking is that for most people and health insurance that means that premiums are more affordable, coverage is optimal for their needs and that our fellow citizens are taken care of. It is basic human decency to help those who can’t help themselves. Barack Obama talks about how this is about the character of our country, and this is an important read.

Make no mistake, this is a shell game. Yes, someone with a pre-existing condition or chronic illness will be able to get a health insurance policy, however, that health insurance policy may not actually cover necessary medical services and medications. This is a tax cut posing as a health insurance plan coming at the expense of those who benefit from Medicaid. Over 27% of Americans have a pre-existing health condition. The Affordable Care Act as it stands was a once in a generation positive change for Americans. The Better Health Care Act is a clear and present danger.

Make your voices heard and sign the Petition for Fair Health Insurance for All. And contact your Senator and tell them to vote no on the Better Health Care Act, tell them you want Fair Health Insurance for All.

Tony Steuer is an author and advocate for financial preparedness. Tony Steuer, CLU, LA, CPFFE, helps people make sense of the financial world in a way that’s easy for them to understand. His books including, “GET READY!,” “Insurance Made Easy,” and “Questions and Answers on Life Insurance,” have won numerous awards. Tony is the founder of the GET READY! Initiative which includes the GET READY! financial organization system, the GET READY! Financial Preparedness Club, GET READY! Podcast, and the GET READY! Financial Principles, a best practices playbook for the financial services industry. Tony served as long-term member of the California Department of Insurance Curriculum Board. Tony is regularly featured in the media including the New York Times, the Washington Post, Fast Company, and other media. He has also appeared as a guest on television shows, such as ABC’s “Seven on Your Side.” Visit to join the GET READY! Financial Preparedness Club and access free resources.

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