Will Consumers Flock To Proposed Health Law?

By Susan Rupe

Younger consumers with lower incomes could be the big losers in the health care reform plan announced by House Republicans earlier this week. And insurance agents and brokers still could be hit in the wallets as well.

Under the GOP proposal, known as the American Health Care Act (AHCA), individuals with low-to-moderate incomes will no longer receive cost-sharing subsidies to help cover deductibles. Instead, people will be able to make much higher contributions to tax-sheltered health savings accounts, to cover deductibles and copayments.

In addition, tax credits used to help individuals and families purchase coverage will be based mainly on age instead of on income. Tax credits would be gradually phased down for individuals making more than $75,000, or married couples earning more than $150,000.

Most significant for insurance agents and brokers, the Republican health care plan did not remove the agent’s compensation from the medical loss ratio calculation.

The GOP proposal also does not permanently repeal the Cadillac tax, a provision that agent organizations including the National Association of Health Underwriters sought to get rid of.

“While we are disappointed that the AHCA does not permanently repeal the ACA’s ‘Cadillac tax’ on high-cost health plans, we are pleased that it will be delayed until 2025,” NAHU CEO Janet Trautwein said in a statement. "This levy does nothing to rein in actual health care costs, the true driver of the cost of coverage.”

Other changes that the AHCA would make to the current health care are a matter of “branding,” said Mike Stahl, senior vice president of HealthMarkets, one of the nation’s largest independent health insurance agencies.

For example, the AHCA removes the individual mandate but incentivizes people to sign up for coverage by allowing insurers to impose a 30 percent surcharge for not maintaining continuous coverage.

“So the mandate is gone but you have a surcharge. Basically, it’s the same concept for requiring people to be covered, but with different wording or branding,” Stahl said.

Fewer people could end up being enrolled in coverage under the new proposal, said Laura Adams, senior insurance analyst at insuranceQuotes.com. “The repeal of the individual mandate could mean that consumers who think they don’t need health insurance and don’t want to buy it will have the perception that it’s no longer required. In addition, some people will still be able to get tax credits to make insurance affordable to them, but for many, they won’t get the kind of subsidy they currently qualify for. So for some people, this means coverage will not be as affordable as it is.”

The tax credits would go to more people than are receiving them under the current law. But the GOP proposal would provide less financial help to lower-income people, according to Larry Levitt, senior vice president of the Kaiser Family Foundation.

Kim Buckey, health care regulations expert with DirectPath, said she believed a more immediate effect of the proposed health care law would be a run on enrollments, “since it may be harder to get coverage under the new plan.”

She also predicted premiums would increase under the proposed plan.

You’re going to see older, sicker people enrolling, which drives costs up,” she said. “And continuing coverage for dependents to age 26 and keeping coverage for those with pre-existing conditions is expensive. And a lot depends on whether insurers come back to the individual market.”

Susan Rupe is managing editor for InsuranceNewsNet. She formerly served as communications director for an insurance agents' association and was an award-winning newspaper reporter and editor. Contact her at [email protected].