Too Little Too Late: The Latest GOP “Plan” to Replace the ACA

As Republicans scramble to address their health care cost crisis, President Trump floated a proposal: redirect funding for the expiring Affordable Care Act (ACA) enhanced premium tax credits to individual spending accounts similar to health savings accounts (HSA). Since then, two Republican senators have put forward versions of this proposal, and Republicans in both chambers have held committee hearings on how to implement this idea.

While the details are still coming together, here is what we know: the Republican approach will mean higher costs for everyone, more Americans without coverage, and financial losses for health care providers. It will also be a bureaucratic nightmare to implement, as only 2% of enrollees in marketplace coverage have HSA-eligible plans.

Bipartisan discussions to extend the ACA tax credits must be prioritized. However, all Democrats must be united against this specific approach as Republicans push forward another attempt to disguise tax cuts for the rich as adequate health care reform. Below, we outline key problems with Republicans’ latest proposal:

1. Republicans would eliminate the enhanced premium tax credits that millions rely on.

If Republicans replace the existing ACA tax credits with $23 billion to fund HSA-like accounts, premiums for ACA coverage will still skyrocket by 114%, $1,016 on average. For some people, premiums will be upward of $30,000. A few thousand dollars in an HSA will not come close to covering the cost to enroll in a plan, let alone afford out-of-pocket costs associated with care. Millions of Americans will be priced out from obtaining insurance.

2. HSAs mainly benefit higher-income households.

Research shows that HSAs provide minimal benefits for the working- and middle-class. The main benefit of HSAs is the ability to set aside and use tax-free dollars for medical care needs. The tax breaks for HSAs are worth little or nothing for those in lower tax brackets, which includes most ACA enrollees. In contrast, the ACA tax credits overwhelmingly benefit those in lower tax brackets.

3. Republicans fail to provide actual insurance coverage.

Part of Trump’s plan is to encourage people to buy “catastrophic coverage,” otherwise known as junk insurance. These plans have little coverage for medical services and come with sky high deductibles, leaving patients with significant out-of-pocket costs. Quality coverage is linked to better health outcomes and less medical debt. Discouraging people from obtaining comprehensive insurance will not make Americans healthy.

4. Republicans would destroy the stability of ACA Marketplaces.

A lump sum payment could help some families with out-of-pocket costs, but millions would still lose coverage because premiums would remain unaffordable. Younger and healthier people would end up in skimpy plans or exit the market entirely. Meanwhile, older and sicker people would pay significantly more for coverage or lose it entirely. As more people drop out, ACA Marketplace risk pools deteriorate because the remaining group is sicker on average, and, thus, more expensive to cover. Premiums will increase, driving even more people out of coverage—and the spiral continues. Insurers would likely leave marketplaces as well, reducing coverage options and increasing premium costs further.

5. Republicans would do nothing to reduce the cost of care.

Past expansions of HSAs haven’t reduced the high cost of health care, and this time would be no different. Conservatives’ claim that HSAs will turn patients into better health care shoppers and drive down costs has proven false. Seeking medical care is complicated and lacks price transparency, and sick patients are often not able to find better priced services in consolidated provider markets. With HSAs covering 59 million Americans, the experiment is over and no longer holds any promise to reduce costs or act as a substitute for coverage.

Conclusion

While in office, President Trump has failed to develop a real plan to address the health care affordability crisis. Instead, with the help of Congressional Republicans, he’s working to dismantle the very programs that millions of working- and middle-class Americans rely on to stay healthy. Trump recently teased an announcement to extend the ACA enhanced premium tax credits, but he then backed off due to Republican disagreement. Now, Republicans’ “plan” is to create an administratively complex scheme that increases premium costs and reduces coverage for millions of Americans while benefiting the wealthy.

Republicans read the political tea leaves then scrambled to find a health care plan. Democrats are right to defend the overwhelmingly popular ACA and must stand firmly against Republicans’ plan. It is time to honor the public’s support for the ACA tax credits, not abandon them.