What Does Trumpcare Mean For Obamacare?

In short, President-elect Trump and a Republican Congress spell the end of Obamacare as we know it. While the details of the new administration's "repeal and replace" plan will come into focus in the weeks to come, there is no question that structural changes to the current health care law will be a (if not the) top priority for the president-elect.

With a significant majority in the House and a 52 seat majority in the Senate, Republican dreams of gutting President Obama's health care law are within reach. While 60 votes are required for a clean sweep, all-out repeal of the law, Republicans can use a budgetary process known as "reconciliation" to dismantle key elements of the health law with only 50 votes. Ironically, it was this same reconciliation process which led to the Affordable Care Act's passage in 2010.

With Obamacare structurally gutted, there remains little question that many of the law's more popular elements will remain, such as dependent eligibility to age 26, no pre-existing condition exclusions, etc. Less popular elements, such as the individual tax penalty for not purchasing coverage, the employer tax penalty for not providing compliant coverage, etc. will go away.

Despite its faults, Obamacare has been quite effective at showing what portions of the health care marketplace are relatively healthy and which areas are not.

For starters, the employer market, through which 155 million Americans currently obtain their coverage is fairly healthy and relatively stable.

Medicare, through which another 50 million Americans receive coverage is likewise fairly popular, albeit underfunded.

The health care policy white paper put forth in 2016 by the Republicans in Congress specifically referenced platform commitments to "preserve employer sponsored insurance" and "protect and preserve Medicare". This is not meant to suggest that there won't be changes in the employer or Medicare health structure; however, the adjustments will be tweaks rather than a complete reboot.

On the otherhand, the glaring problem with the health insurance marketplace relates to roughly 110 million people in America who rely on Medicaid, individual coverage or chose to go without health insurance coverage.

On the Medicaid front, expect to see a focus on state-based program management. Under Obamacare, Medicaid became increasingly federalized. So much so, that many states, including Georgia, chose not to expand coverage given the fiscal handcuffs that came with acceptance of the federal requirements.

Under Trumpcare, states will likely be provided the option to either choose a per capita Federal allotment for Medicaid or a federal block grant that they can use, within a variety of parameters, to design the Medicaid program structure that works best for their state. In states such as Georgia which declined expansion under Obamacare, a new state-based Medicaid system could result in a significant expansion of coverage to Medicaid eligible individuals.

Most observers would agree that the most poorly functioning portion of the health care market under Obamacare relates to the individual market. As such, expect to see significant changes there.

Instead of providing tax subsidies for low-paid workers to purchase insurance, expect to see tax credits and/or deductions made available for all individual coverage purchasers. Further, expect to see approval for health insurers to offer coverage across state lines and an increase in flexibility for health savings account programs.

And, last, but not least, expect to see more flexibility in plan design so that individuals wanting to purchase more customizable coverage, such as catastrophic coverage, can do so rather than being forced into the standardized coverage requirements under the Affordable Care Act.

There remains some question on how to convince the 30 million plus uninsured Americans to purchase health insurance. This is a major concern to many stakeholders, especially hospitals, given that without an individual tax penalty for not purchasing coverage, many of these Americans will choose to continue to forgo coverage.

Nonetheless, while Obamacare was focused on compelling everyone to purchase insurance coverage through the application of coverage restrictions and tax penalties, Trumpcare will likely introduce a higher degree of flexibility and competition expanded private market competition.

The primary question that remains is whether the removal of the "sticks" in Obamacare and introduction of the "carrots" within Trumpcare will result in a significant increase in the uninsured. In any event, it will likely result in a more pleasant insurance experience for those who currently have, and want to keep, health insurance coverage.

David Bottoms is senior vice president of The Bottoms Group and a principal of TBX Benefit Partners.