Goldman Explains What The Repeal Of Obamacare Really Means

After months of internal discord, House Republicans finally approved a bill to overhaul Obamacare, which they have been attacking since it was enacted in 2010.  While there are various nuances, here are the bill’s main provisions courtesy of Reuters:

COVERAGE

• The Republican plan would maintain some of Obamacare’s most popular provisions. It would allow young adults to stay on their parents’ health plan until age 26.
• The bill would let states opt out of Obamacare’s mandate that insurers charge the same rates on sick and healthy people. It would also allow states to opt out of Obamacare’s requirement that insurers cover 10 essential health benefits, such as maternity care and prescription drug costs.
• The measure would provide states with $100 billion, largely to fund high-risk pools to provide insurance to the sickest patients. The bill also would provide $8 billion over five years to help those with pre-existing conditions pay for insurance.
• It would let insurers mark up premiums by 30 percent for those who have a lapse in insurance coverage of about two months or more. Insurers won a provision they had long sought: The ability to charge older Americans up to five times more than young people. Under Obamacare, they could only charge up to three times more.

TAX

• The bill would end in 2018 Obamacare’s income-based tax credits that help low-income people buy insurance. These would be replaced with age-based tax credits ranging from $2,000 to $4,000 per year that would be capped at upper-income levels. While Obamacare’s credits gave more help to those with lower incomes, the Republican plan would be largely age-based.
• The Republican bill would abolish most Obamacare taxes, including on medical devices, health insurance premiums, indoor tanning salons, prescription medications and high-cost employer-provided insurance known as “Cadillac” plans.
• Those taxes paid for Obamacare. Republicans have not said how they would pay for the parts of the law they want to keep.
• The bill would also repeal the Obamacare financial penalty for the 2016 tax year for not purchasing insurance, as well as a surtax on investment income earned by upper-income Americans.
  It would repeal the mandate that larger employers must offer insurance to their employees.

MEDICAID

• Under Obamacare, more than 30 states, including about a dozen Republican states, expanded the Medicaid government health insurance program for the poor. About half of Obamacare enrollees obtained insurance through the expansion.
• The bill would allow the Medicaid expansion to continue until Jan. 1, 2020. After that date, expansion would end and Medicaid funding would be capped on a per-person basis.
• State Medicaid plans would no longer have to cover some Obamacare-mandated essential health benefits, fulfilling a Republican promise to return more control to the states

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And while all of the above works in theory, there remains a rather sizable gap between the theory and practice. So for all those curious what yesterday’s bill passage means in practical terms, here is Goldman’s Alec Philips with the explanation:

House Passes AHCA BOTTOM LINE: The House has passed its health legislation but the issue is unlikely to be resolved for several more months, if at all.

The main effect of House passage is to delay the consideration of tax legislation, which looks even more likely than before to be delayed until 2018.

MAIN POINTS:

1. The House passed its ACA replacement bill, the American Health Care Act (AHCA) 217-213, which moves the debate to the Senate. However, Republicans in that chamber are unlikely to support the House bill in sufficient numbers, likely requiring substantial changes to the bill. In addition, procedural hurdles exist that could require several aspects of the House-passed bill to be stripped (including those that relate to the recent political compromises used to bring hesitant lawmakers onboard). It is far from clear at this point whether the Senate will be able to pass its own version of the AHCA at all, and at a minimum it is likely to take months to do so.

2. In our view House passage of the AHCA is likely to further delay the consideration of tax reform. House passage arguably reduces doubts that Republicans can assemble a working majority for controversial legislation in the House, which suggests that complex tax legislation might be achievable as well. However, since the House cannot act on tax reform using the “reconciliation” process until the Senate has passed (or decides not to pass) its own health legislation, tax legislation looks unlikely to emerge until September in our view. Given the time it will likely take to reach an agreement on tax legislation, this suggests that enactment of tax legislation is unlikely until Q1 2018. While our base case is still that legislation is more likely than not to pass in 2018, further delays could push consideration of tax legislation too close to the upcoming midterm election, reducing the likelihood that tax legislation is enacted in the next two years.