On February 16, 2017, House Republicans issued an “Obamacare repeal and replace” policy brief for members to use in speaking with constituents during the Presidents’ Day break. This repeal-and-replace plan is not yet a legislative proposal, just a sketch, and it may not even enjoy consensus within the caucus. Much of the plan is drawn from Paul Ryan’s Better Way.

The House Republican plan, as proposed, would represent a major departure from the Affordable Care Act (ACA) system in place for both payers and consumers.

The main takeaway is that this plan accelerates the trend toward greater consumer cost-sharing for health care services and products.

Under this plan, both the employer and individual mandates will be zeroed out and replaced with a system that provides “advanceable and refundable tax credits” to individuals who would have been eligible for subsidies under the ACA.  Thus, employers will not be required to provide health coverage to employees, and individuals will not be required to maintain health insurance. 

The House Republican plan allows individuals who purchase coverage more flexibility in terms of the coverage they buy.  A centerpiece of the plan is that individuals can use any eligible plan that has been approved by the state and sold in the individual market.  This includes catastrophic coverage that is currently prohibited by the ACA’s essential health benefits and minimum value requirements. While the details are unclear, previously subsidy-eligible individuals will be given a credit to purchase coverage; if they chose a plan that costs less than the subsidy, they will be entitled to keep the remainder in a health savings account (HSA).

* * *

Below are highlights of the plan, plus insights from our Capitol Hill team on things not said in the handout. For a separate discussion of Republicans’ planned changes to Medicaid, see Medicaid Outlook: Policy and Regulatory Change in 2017.

Repealing ACA Taxes

Penalty taxes for the individual and employer mandates are to be repealed totally and immediately under budget reconciliation. Expected relief from drug, medical device, insurer, and high-value employer health benefit plan (“Cadillac”) taxes is less defined, and could be immediately repealed or phased out during a transition period.

Health Care Tax Credits

Currently, ACA subsidies are “advanceable refundable tax credits” limited to eligible individuals buying plans through the exchange, following an income-based formula. The House Republican plan would allow all citizens who purchase an individual policy (including catastrophic) approved by the state to benefit from such a tax credit. This universal credit would not be tied to income but instead would rise based on the individual’s age. The credit would not be available to those receiving insurance through an employer or government program. The credit could be applied to unsubsidized COBRA premiums. Unspent tax credit dollars can be deposited into an HSA.

Health Savings Accounts

HSAs feature more prominently in the health coverage landscape under the plan. Tax-deductible limits on employer/individual contributions to HSAs would rise to $6,550 for self-only coverage and $13,100 for family coverage for 2017, from current law limits of $3,400 and $6,750, respectively. Additional tweaks include loosening rules on catch-up contributions for married couples and an administrative fix to allow the use of HSA funds toward health insurance deductibles retroactively.

High-Risk Pools

The federal government would give “state innovation grants” to let states set up programs that support persons unable to get adequate coverage in the regular insurance market.