Democrats, Republicans, and Your Health Insurance

'Medicare For All' Rallies Held Across U.S. Ahead Of Senate Health Care Vote
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Health care reform has been a contentious political topic in the U.S. for many years, and with the Trump Administration in place, the future of the Affordable Care Act is uncertain. What does each party want? Let's take a look at how the official platforms of the Democratic Party and Republican Party could impact your health insurance.

The Framework of the Affordable Care Act

Democrats generally support the ACA, but would like to fix its flaws and generally improve the law.

Democrats have proposed the possibility of extending the ACA to the U.S. territories, and want to empower states to use innovation waivers (1332 waivers) to create their own approaches to health care reform that are as good as—or better than—the current system. Many Democrats also support fixing the ACA's "family glitch" by basing affordability calculations for employer-sponsored coverage on family premiums rather than employee-only premiums.

Trump and most Republicans want to repeal the ACA and start over with a new approach. There could be some flexibility here though; two Republican Senators introduced legislation in January 2017 that would have given states the option of keeping the ACA or switching to a new system.

Medicaid Expansion

Medicaid expansion is a cornerstone of the ACA and accounts for a significant portion of the increase in the number of Americans who have health insurance.

The ACA called for Medicaid to be expanded in every state, to provide coverage to people with household income up to 138 percent of the poverty level.

But the Supreme Court ruled in 2012 that Medicaid expansion would be optional for states, and as of early 2017, there were still 19 states that had not accepted federal funding for Medicaid expansion.

In 18 of those states (all but Wisconsin), there's a Medicaid coverage gap; roughly 2.6 million people are stuck without access to Medicaid OR premium subsidies in those states.

Democrats want to push for the ACA's Medicaid expansion in the 19 states that have not yet expanded coverage, and are opposed to proposals to block grant Medicaid funding to the states (block grant proposals involve eliminating the current system of federal matching funds based on state Medicaid funding, and instead giving states a set amount of federal funds to use as they see fit for their Medicaid program).

Republicans want to repeal the ACA, which would include repealing Medicaid expansion. Their preferred approach to Medicaid is block granting, and the party platform notes that they will give states a free hand to modernize Medicaid by block-granting the program without strings. Republicans have also proposed per-capita Medicaid allotments to states.

Health Savings Accounts

Health Savings Accounts (HSAs) are tax-advantaged accounts that people can use to save money to pay for future healthcare costs. They amount to a trifecta of tax savings:

  • The money you deposit in the account is deductible on your tax return (or entirely pre-tax if you contribute to your HSA via payroll deduction).
  • The money in the account grows tax-free.
  • You're still not taxed on the money when you withdraw it, as long as you use it to pay for qualified medical expenses (some people use these accounts like a Traditional IRA, as the money can be withdrawn for purposes other than medical expenses without penalty after age 65. But in that case, the withdrawals would be subject to regular income tax).

Current IRS regulations only allow people with HSA-qualified High Deductible Health Plans (HDHPs) to contribute to an HSA, and there are contribution limits: For 2017, the maximum amount you can contribute to an HSA is $3,400 for an individual, or $6,750 if your HDHP coverage is for a family.

Although HSAs are certainly a useful tool for funding future health care costs—and their tax advantages are significant—we have to keep in mind that their usefulness only extends as far as a person's ability and willingness to fund the account. As such, they tend to be favored by those with higher incomes.

Democrats have not proposed any significant changes to the current regulations that govern Health Savings Accounts.

Republicans, on the other hand, consider HSAs to be a potential health care reform solution. The first line of Trump's healthcare page during the campaign stated "Repeal and replace Obamacare with Health Savings Accounts." They have proposed various changes, including higher contribution limits (perhaps aligned with the HDHP deductible), fewer restrictions on who can contribute to an HSA, and more relaxed rules in terms of how HSA funds can be used without taxes or penalties.

Two bills that were introduced by Republican Senators in January 2017 called for changes involving HSAs: The Patient Freedom Act would change HSAs to Roth HSAs (contributions would not be deductible, but growth would be tax-free, and withdrawals for medical expenses would be tax-free), and would increase the contribution limit. The Obamacare Replacement Act would eliminate contribution limits altogether, and would also allow HSAs to be used by people who do not have HDHPs.

Premium Subsidies and Affordability

The primary concern lately in terms of health insurance premiums and affordability has been in the individual market, where rates increased alarmingly for 2017. The individual market is a very small segment of the population, however, and rate increases have been much more muted across the full population.

Democrats have proposed various strategies for making coverage and care affordable. They include tax credits for people whose out-of-pocket spending exceeds 5 percent of their income, and extending premium subsidies to ensure that nobody has to pay more than 8.5 percent of income for premiums, which would eliminate the "subsidy cliff" that currently exists for some enrollees.

Democrats have also proposed a "public option" health plan that would compete with private health insurance carriers in an effort to bring down prices, and the ability for people age 55 and older to buy into Medicare, which currently provides coverage starting when people turn 65.

Democrats also want to give the government authority to block rate increases that are deemed unjustified. Right now, to have an "effective rate review" program, a state—or the federal government—just has to review proposed rates and determine whether they're justified or not. But unless the state has enacted rules that allow them to block unjustified rates, there's no built-in provision for that. It should be noted, however, that the current medical loss ratio rules require insurers to send rebates to members if their administrative costs eat up more than 20 percent of premiums; this creates some built-in protection against price gouging for the purpose of driving up profits or executive compensation.

Republicans have proposed allowing individuals to fully deduct their health insurance premiums on their taxes, which would lower the real cost of coverage. Employer-sponsored health insurance premiums are currently paid pre-tax, and self-employed individuals can deduct their premiums.

But non-self-employed people who buy their own health insurance cannot currently deduct their premiums unless they itemize their deductions. If they do itemize, they're only allowed to deduct medical expenses—including premiums— that exceed 10 percent of their income. This is much less beneficial for individuals than the current rules for employer-sponsored insurance and self-employed individuals.

Republicans also want to allow people to purchase health insurance across state lines in order to increase competition and bring down prices. However, it's unclear whether insurers would be interested in expanding their current coverage areas, due to the challenges involved with building a network in a new area.

There are also questions about regulatory control, as the current setup allows each state's Insurance Commissioner to regulate all plans that are sold in that state (even though the insurance companies are often based in another state), which means carriers have to modify coverage offered in each state to conform with specific state regulations. If that regulatory control were eliminated for out-of-state plans and the ACA were concurrently repealed, consumer protections would likely decline as insurers would choose to domicile in states with lax regulations.

Contraceptives and Abortion

The word abortion is used 35 times in the Republican Party Platform, but only six times in the Democratic Party Platform. The GOP makes it very clear that they want to eliminate all federal funding for organizations like Planned Parenthood that provide abortion services. And while the Democratic Party believes that "safe abortion must be part of comprehensive maternal and women’s health care," the GOP is "firmly against" abortion. Trump has embraced similar stances against abortion.

The Hyde Amendment has been in place since 1976, and bans the use of federal funds to pay for abortion in most cases. While the Democratic Party Platform calls for repeal of the Hyde Amendment, the Republican Party Platform calls for its codification and "application across the government, including Obamacare."

Democrats generally support the ACA's provision that all health insurance plans must cover contraceptives with no cost-sharing, and Democratic leaders were instrumental in making emergency contraception available over-the-counter.

The Republican Party Platform opposes school-based clinics that provide contraceptives, and rejects the idea of allowing "powerful contraceptives" to be sold over-the-counter. But Trump has stated that he's in favor of allowing the sale of contraceptives without a prescription.

Pre-Existing Conditions

The ACA changed the face of individual health insurance by making it guaranteed-issue in every state, regardless of pre-existing conditions. Group health insurance plans already had to cover pre-existing conditions, but they could impose pre-existing condition waiting periods prior to 2014 (to be clear, insurers were allowed to charge employers higher premiums in many states based on the group's claims history, but individual employees could not be rejected from the group's plan due to pre-existing conditions).

Now that the ACA has been implemented, pre-existing conditions are covered on all plans (except individual market grandfathered plans) with no waiting periods. Employers can still have a waiting period of up to 90 days before coverage takes effect, but once it does, pre-existing conditions are covered with no additional waiting period.

Democrats want to preserve the ACA, including the provisions that protect people with pre-existing conditions.

Some Republican proposals call for full repeal of the ACA, which would mean that pre-existing conditions could once again allow an insurer to decline coverage in the individual market, or impose waiting periods in the group market. Other Republican proposals call for maintaining the protections for people with pre-existing conditions.

In Republicans proposals that would eliminate the ACA's guaranteed issue provisions, there have been some calls for reviving state-based high-risk pools to serve consumers with pre-existing conditions. Trump has also said that his market-based solutions (such as allowing for the sale of plans across state lines) would allow carriers to continue to cover pre-existing conditions without regulations requiring it, but there's little evidence that would actually be the case.

Prescription Drug Costs

Democrats want to limit monthly out-of-pocket costs for pharmaceuticals (the concern here is high-cost specialty drugs, which are typically covered with coinsurance—a percentage of the cost—rather than flat copays; some states have already capped out-of-pocket costs for prescriptions).

Democrats also want to end "pay for delay," (a practice that keeps low-cost generics drugs out of the market). The party's platform also includes allowing regulated import of prescriptions from other countries, and lifting the current ban on Medicare negotiating drug prices with pharmaceutical manufacturers.

The Republican Party Platform doesn't address prescriptions other than in the context of the opioid epidemic and efforts to address prescription drug abuse. During the campaign, Trump said that he wanted to negotiate costs with the pharmaceutical industry, and to allow for the import of lower-cost drugs from other countries. However, his position on negotiating drug pricing had changed by late January.

Individual Mandate

The ACA's individual mandate (individual shared responsibility provision) requires most Americans to maintain health insurance coverage or face a tax penalty. Insurers contend that this is the only way guaranteed-issue health insurance is feasible, and prior experience tends to support that claim.

Democrats generally support the individual mandate.

Republicans generally oppose it, although, in early 2016, Trump appeared to be in favor of it. He quickly reversed his position, noting that he supports full repeal of the ACA, including the individual mandate.

The individual mandate is one of the more controversial aspects of the ACA, and the penalty associated with it could be eliminated with a filibuster-proof reconciliation bill. That could cause instability in the individual health insurance market, however, and the issue is still being considered by lawmakers, with input from the insurance industry and consumer advocates.

Sources:

Barnett JC, Vornovitsky MS. United States Census Bureau, Health Insurance Coverage in the United States: 2015. Issued September 2016

Blumberg LJ. The Urban Institute. Sales of Insurance Across State Lines, June 2016.

Centers for Medicare and Medicaid Services, Center for Consumer Information and Insurance Oversight. Section 1332: State Innovation Waivers

Garfield R, Damico A. Kaiser Family Foundation, The Coverage Gap: Uninsured Poor Adults in States that Do Not Expand Medicaid – An Update. January 21, 2016.

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