The bill changes the refundable tax credits currently available under the Affordable Care Act, so that in order to obtain a federal tax credit to assist in coverage, individuals would no longer be required to purchase insurance through the marketplace. The credits would range from $2,000 for people in their 20’s to $4,000 a year for people in their 60’s. This tax credit would be reduced for individuals making over $75,000 and families making over $150,000 a year.
Significant changes would be made to Medicaid including primarily changing the program from an entitlement program, where the government pays all the health-related costs for those who qualify, to a grant program, where the states would be responsible for any costs in excess of the funds received from the federal government. States could choose to receive a certain dollar amount for each Medicaid enrollee or receive a fixed grant amount. This intends to result in fewer federal requirements to be followed by the states.
The bill prohibits insurers from cutting off coverage, or charging more for coverage, of individuals with pre-existing conditions as long as they don’t experience a gap in coverage for greater than 63 days. If any individual experiences a gap in coverage for greater than this period of time, the bill encourages insurers to impose a 30% surcharge on premiums to be in effect for one year after the lapse. This policy intends to encourage individuals to maintain continuous coverage.
The bill eliminates the Affordable Care Act mandate which requires employers with at least 50 full time employees to provide health insurance coverage to their employees.
The bill would allow states to opt out of certain provisions of the Affordable Care Act. If states choose to do so, they could apply for waivers that would allow insurers in their states to do three things:
- Charge older adults up to five times as much as young adults for the same coverage. Under the Affordable Care Act rules, this threshold is three times what young adults are charged.
- Eliminate certain required coverage under the Affordable Care Act such as maternity care, emergency services, mental health care, and prescription drugs.
- Charge more or deny coverage to individuals with pre-existing health conditions.
The bill requires states to create other ways to insure and help protect individuals who are not protected by the new bill. To do this, the bill provides funding to states over the next ten years to be used towards purposes such as subsidizing premiums, providing coverage to those with pre-existing conditions, and to assist in covering the costs of mental health care and the treatment of drug addiction.
Lastly, the bill would eliminate the following taxes imposed on high-income individuals:
- The Net Investment Income Tax which imposes a 3.8% surtax on investment income of individuals with AGI above $200,000 and $250,000 for married couples.
- The additional 0.9% Medicare surtax on individuals with AGI above $200,000 for individuals and $250,000 for married couples.
It’s difficult to predict how the final form of the American Health Care Act will turn out, but it is important to be aware of any likely changes to be able to plan accordingly.