HOW WILL TRUMPCARE AFFECT COVERED CALIFORNIA AND OBAMACARE
10/13/2017 Update On Trump Executive Order
Trump has announced a plan to sign an executive order regarding the benefit subsidy.
There’s a lot of confusion in the media on what this is and what it isn’t!
Let’s remove the politics and understand how it will affect Californians.
What does the Executive Order do?
It attempts to eliminate re-imbursement to the health carriers to support the Enhanced Silver plans.
Basically, the existing law states that a person can get richer versions of the Silver plan for the same price based on income.
The standard Silver 70 is available to everyone.
The Silver 73, 87, and 94 are available based on income.
A one page summary of the four flavors of Silver plan is here.
How Does Benefit Subsidy Currently Work?
Since the benefits can be much richer, the Federal government has been reimbursing the carriers for the exposure difference between the Silver 70 and the other Silver plans.
For example, if the deductible is different by $300 between the Silver 70 and Silver 73 and a person on the Silver 73 meets their deductible, the government would reimburse the carrier for the $300 difference.
This can be a big deal for the Silver 87 and 94 which are much richer.
The Executive order says that the Federal government will not reimburse for this different exposure.
The monthly tax credit (to pay premium) is NOT affected.
This is a big deal for people on the Silver plan.
So… Covered Ca foresaw the possibility of this move and included a surcharge on all Silver plans to make up this difference.
For people with a tax credit, they won’t feel the surcharge since the tax credit goes up along with the underlying plan.
For people on a Silver plan WITHOUT a tax credit, they will see a much higher increase for 2018 and the Bronze plan probably makes more sense.
If the person wants to keep the Silver plan (very popular), they may want to look at off-exchange IF they are NOT eligible for tax credit.
You can quote both on and off-exchange plans starting 11/1 here:
As Certified Covered Ca agents, we’re happy to help with any questions on this. Our assistance is 100% free to you.
Call 800-320-6269 or email us.
TrumpCare Update 6/1/2017
So we spent the last 4 years learning an entire new system with Covered California.
After enrolling 1000’s of Californians in Covered Ca and more training seminars than we care to remember…
It may all change!
Change seems to be the only constant in healthcare so let’s look at how the election of Trump will affect Obamacare and Covered California.
First, a disclaimer.
We’re aiming at a moving target with so much in flux so we will constantly be updating this guide as we get more clarity.
Right now, it’s pretty muddy water!
Every news channel it looking at this same issue but we want to really get down to how it will affect real people in three different situations.
The three groups of people affected are:
- Individuals and families eligible for a Tax Credit or Medi-cal through Covered California
- Individuals and families NOT eligible for a tax credit
- California small business with 1-100 employees
The effect of any proposed changes really affect these groups quite differently.
Let’s look at what the current barometer shows for proposed changes.
Likely Trump Changes To Obamacare And Covered California
Let’s first talk about what Trump has hinted at keeping.
Trump has said publicly that he wants to keep the following:
- Guaranteed issue coverage – can’t be declined based on health
- Kids can stay on parent’s policy until age 26
So what does he want to get rid of tentatively?
There’s a lot more here so let’s look at the probability of removing each aspect.
Possible changes bordering on Probable:
- Mandate – Penalty for not buying health insurance
- Exchanges – Covered California in California
- Small business mandates and rules
Possible but less likely
- Essential health benefits – standardized benefits levels (Bronze, Silver, Gold, etc)
- Medi-cal expansion and tax credits
Those are really the core tenants of the ACA (Obamacare law).
Let’s look at these in reality.
Guaranteed Issue Thorn To Any Changes
Here’s the deal, if you have guaranteed issue (Trump wants to keep) but no Mandate (penalty for not having coverage)…
Health insurance premium will explode higher.
Really, the reason current rates keep going up is having guaranteed issue with too weak of a penalty.
The financial costs of a hip replacement, Hep-C treatment, etc is just too high.
If a person can get coverage and immediately hit the risk pool with $100-200K in health care expenses, well…you get what we have now.
Premiums jumping 25% annually.
In fact, it accelerates as healthy people drop out or do not enroll due to the higher cost.
You can’t have one without the other and this will be an issue for the Republicans. The mandate is very unpopular. Guarantee issue is very expensive.
The Tax Credit Question
Obamacare is REALLY about two key changes…
Guaranteed Issue and Tax Credits.
The other items are window dressing. The core cost and inherent weaknesses come down to Guarantee issue and Tax credits.
We look at the Guaranteed issue problem. What about tax credits?
Tax credits offset the rising costs that GI causes but not for everyone.
The real cost of Obamacare IS the tax credit.
10’s of billions each year in real money (not just a Federal budget line trick).
So the question is this…will Trump reduce or remove the tax credits?
We’ll lump Medi-cal in this bucket since both are based on income eligibility and both pose a large expense at the Federal level.
Both also significantly reduce health insurance costs to income-eligible Californians.
We really don’t have clarity on this question.
Reports point to Trump looking to reduce the tax credit and roll-back the Medi-cal expansion.
Those are just reports and we’ll update when we have better info.
What kind of time table are we looking at for any changes and what does Trump want to “replace” Obamacare with?
Very interesting ideas floated on the latter.
Odds That Trump Can Replace Obamacare?
Keep in mind that Obamacare was passed with reconciliation which is a back-room short cut way that Congress usually only uses to pass simple changes.
It was never used for something as big as Obamacare before since it only needs a majority vote (not the usual supermajority).
Obamacare would not have passed with supermajority so they used reconciliation.
Little bit of legislative “Live by the sword…die by the sword”.
So, Trump can remove Obamacare and he’s stated that it will be done very quickly.
For those who are used to glacial changes in government, this calculus may not apply to Trump.
Timetable For Replacing Obamacare With Trumpcare
Trump has stated that we wants to remove Obamacare within the first 100 days and this may well happen.
That doesn’t mean the effects will hit Covered California members right away.
2017 and maybe even 2018 will likely not see many changes for Covered Ca.
There are some Obamacare pieces though that can be reversed right away.
Not so much changes for enrolled members but removing requirements (i.e. penalty).
As we get more information on this timetable, we’ll update our visitors and this page.
What Will Trump Replace Obamacare With?
So removing Obamacare is the easy part (relatively speaking).
What do you replace it with?
The problem with Obamacare is that there was very little in the actual bill to contain health care utilization and costs.
That’s really the only thing that matters!
At least in the long term.
If the number of people diagnosed with diabetes continues to skyrocket (think medications, dialysis, resulting health issues, etc), it doesn’t matter how you’re paying for care.
You’re chasing good money after bad!
Obamacare missed this piece and really only looked at helping people pay for an ever-skyrocketing health insurance plan.
It was baked right into the law as we wrote about in 2012.
Not surprising that Congress didn’t see it.
In fact, some aspects of the law accelerated health care utilization.
Okay…enough “told you so’s”.
So What Does Trump Want To Replace Obamacare With?
Here’s where it gets interesting.
Enter Ben Carson.
He’s intimately involved in crafting any plan on what replaces Obamacare and we’re cautiously optimistic.
Here are the key tenants being floated around:
- Focus on Health Savings Accounts (HSA’s)
- Potential major risk pools for those that can’t qualify (the GI problem).
- Life long accounts that follow a person and can be given to children
Let’s really focus on the HSA.
This is a huge deal for many reasons but most importantly.
The HSA might be the only vehicle that bends the cost curve over time.
Read that line again. It’s the only one that matters in this whole article.
First, what is an HSA?
An HSA combines a high deductible health plans (like current Bronze) with a tax-favored account to pay the smaller bills.
You can find more information on the HSA here but the net net is this:
You buy a lower cost, high deductible plan to cover the big bills and self-insure the smaller bills with pre-tax money.
Why The Trumpcare HSA Bends The Cost Curve
We’re writing extensively on HSA’s and why they might just save our healthcare system, but the highlights before we get into the three categories of people.
Trump HSA Saving Graces
- They encourage shopping in healthcare
- They reward better health with MONEY to the member
- They reflect what really matters in healthcare…the BIG bill
Health insurance and shopping.
The one thing that can run $1000’s each year out of pocket and almost no one SHOPS health care.
– Generic versus Brand RX
– Different locations for services
– Heck…different pharmacies for medication
We’re talking about the most uncompetitive market in America (aside from maybe Defense contracting…dig dig).
The difference for the exact same medication can be 100’s of percent across pharmacies in a 5 mile radius.
This has all the transparency of muddy water.
Why not…there’s a complete disconnect between the cost of care and the member due to…health insurance copays.
HSA’s get rid of this disconnect and guess what…
Members shop accordingly.
Nothing like money out of pocket to encourage action!
Again, we get more into how this works with our HSA articles but you can quickly see the big deal.
More Money To The Member
“If I lose 15 pounds and get off the blood pressure meds, I save $75/month.”
Don’t kid yourself…I had an employee say that exact statement when we were rolling out the HSA to the company.
That was almost 15 years ago. Imagine where we would be if the HSA was adopted back then.
That money stays with the member. It’s an asset. Heck, this is a great way to build a retirement account.
Covering The Big Bill
HSA’s are designed to cover the really big bill (hence the high deductible).
You get a tax incentive to fund for the smaller bills.
That’s essentially a big discount.
Health insurance was never intended to pay for the really small stuff. Thank the early 90’s for that (and hair metal while you’re at it)
Our Wishlist For The Trumpare HSA
If the Trump team wants to get really smart, might we make some recommendations.
Fund the HSA accounts based on income
There’s still the issue of people with low income affording healthcare.
Instead of giving tax credits for premium, fund the HSA accounts based on income need.
This still keeps the effectiveness of the HSA but helps people that can’t afford to fund the HSA. A smarter (and cheaper) way to address the segment of the market that can’t afford health insurance.
Little side bonus…you’re building the life-long retirement accounts on the sly (wink wink).
“You mean…If I quick smoking, I might have more money to retire with??”
Have the Federal government re-insure the big bill
No more exchanges and tax credits. Have the Fed re-insure big bills…say over $50K in a calendar year directly to the carriers.
The rates will drop in half immediately.
The big bill is what is killing health insurance premiums.
Think facility care…hospitals, surgeries, cancer, etc.
This still retains the “magic” of HSA we mentioned above but by dropping costs in half, more people will enroll especially to get the HSA funding mention in point #1.
This also offsets the Guaranteed Issue problem which is the Achilles Heal of replacing Obamacare mentioned above.
Create “Yelp” for Healthcare
Rather than spending billions on clunky health exchanges, spend a fraction of that to create an online review/comparison system for all things medical.
You need Lipitor, show the costs for all pharmacies in 10 miles of you.
Also show the generic equivalent.
Need a cat-scan? Show the providers, costs, and reviews.
It’s crazy we don’t have this.
You might shave 30-50% off health insurance premium with just this system.
Partner with private tech companies to build this out. Create the marketplace, let them compete.
3 Steps and Trumpcare can revolutionize Health Care!
Please please read this, architects of Trumpcare. We have lots of ideas because we’re knee deep in the weeds of health insurance.
We’ve got some stories from down here.
Okay, enough of our hopeful wishlist.
Obamacare will definitely be removed…but probably not in it’s entirety and not right away.
Trumpcare will likely be built around the HSA which is a great move for the longterm survival and affordability of our health care system.
We’ll continue to help people navigate the new system as it comes online with the goal being the same as always…
Finding the best health insurance value for the price.