Three weeks ago on my blog, I shared an analysis of 22 potential healthcare reform elements that may be included in Affordable Care Act repeal and replacement legislation being drafted in Washington, D.C.

Since that time, a proposed rule has been drafted to stabilize the insurance markets and Monday, Republicans in the House unveiled their draft replacement bill.

The elements highlighted below appear in the proposed rule and/or draft legislation. Updated notes appear in the links to the analysis of each element.

ELEMENT	IMPLICATION	LIKELIHOOD	DESIRABILITY
1. Universal Access	Too vague to assess	2	8
2. Guaranteed issue	Allows coverage for preexisting conditions	10	10
3. Employer mandate	Requirement for employers with more than 50 employees to provide ACA-compliant health insurance to their employees	0	2
4. Allow children to remain on their parent’s health plan until age 26	Increases the number of generally healthy young people who have insurance coverage	10	7
5. High deductibles	Increases the patient responsibility for healthcare spending	4	0
6. Annual and lifetime caps	Eliminates the caps on insurance benefits	5	9
7. Decrease essential health benefits	Promotes greater choice of benefits	10	3
8. Health savings accounts	Gives more control to/creates more accountability for individuals over their healthcare spending	9	4
9. Refundable tax credits	A funding mechanism to assist individuals in paying their healthcare premiums and costs	9	4
10. High risk pools	Ensures coverage for certain people with very high-cost preexisting illnesses and decreases the risk for commercial insurers	6	5
11. Association health plans	Allows small businesses to come together to spread risk	5	7
12. Increase age rating band	Allows insurers to charge less to younger insureds and more to older insureds	8	8
13. Restrictions on special enrollment periods (SEPs)	Allows those with life events to sign up for insurance coverage, but discourages those who wait to sign up until they have a medical need	9	10
14. Decrease the 90-day grace period	The ACA provided for a 90-day grace period for insureds to catch up on premium payments before being terminated from coverage	6	9
15. Cadillac tax/employer tax exclusion cap	A tax on high-value employer health plans/a limit on tax exclusion for employers for the cost of insurance they provide to their employees	0/3	0/2
16. Narrow networks	Restrictions on the number of providers in a network, leading to price concessions that in turn lead to lower premiums	3	9
17. Sale of insurance across state lines	The intent is to increase competition and decrease premiums	10	0
18. Medicare privatization and premium support	Uses free-market principles to drive greater efficiency and lower costs	1	5
19. Allow Medicare to directly negotiate prices with pharmaceutical companies	Applies market power pressure to reduce prescription drug costs	1	7
20. Allow the importation of drugs from other countries	Allows U.S. citizens to purchase their medications at the lower prices for which these drugs sell in other countries	1	3
21. Medicaid block grants	The intent is to give states more control and flexibility, while limiting and decreasing the federal expenditure	8	2
22. Privatization of Medicaid	Allowing states to contract with commercial insurance carriers to administer private health insurance for Medicaid beneficiaries, usually through a managed care product	2	2

Since Republicans will not be able to garner support from Democrats for their replacement bill, they still plan to use the reconciliation process that I previously wrote about. Because of this, they will not be able to completely repeal the ACA, but the reconciliation legislation would repeal the ACA taxes that in large part support the costs of the ACA, amend the individual and employer mandate penalties to be zero, repeal the cost-sharing subsidies that help lower-income individuals pay their deductibles and other out-of-pocket costs, and end the Medicaid expansion.

Most of the insurance reforms of the ACA, such as guaranteed issue, coverage for children up to age 26 on their parent’s plan and elimination of annual and lifetime limits, would be left intact.

The proposed rule will undergo a notice and comment period and the draft legislation will go through a markup process in the House Energy and Commerce Committee; here are the current features.

2. Guaranteed issue

Under the ACA, insurers can no longer underwrite individuals purchasing ACA-compliant plans, and cannot charge higher premiums to those with poorer health status. The only rating criteria they can use are age, smoking status and county of residence.

Under the draft Republican plan, guaranteed issue would continue, however, there is a new continuous coverage requirement. If a person had a gap in coverage for at least 63 sequential days, the insurer would be able to increase premiums for the next 12 months by 30 percent. The proposal does not allow insurers to exclude coverage for preexisting conditions or to perform health status underwriting, but rather merely allows for the imposition of a premium penalty for those who do not maintain continuous coverage.

4. Allow children to remain on their parent’s health plan until age 26.

This provision of the ACA would remain unchanged in the new Republican replacement bill.

5. High deductibles.

High deductibles, while not explicitly called for in the Republican plan, would be expected to continue in association with the promotion of health savings accounts.

6. Annual and lifetime caps.

The ACA eliminated these caps, and this would continue under the Republican plans.

7. Decrease essential health benefits.

The Republican bill would continue the ACA’s essential health benefits categories, but allow states to define what essential health benefits must be included in insurance plans offered in their particular state.

The intention of this provision is to allow for policies to be tailored to the needs of individuals. The law would also allow insurers to offer “skinny” health plans that include minimum coverage for far lower premiums, resembling catastrophic plans so long as the state department of insurance permitted it under its rules.

However, if allowed, this would almost certainly mean that the premiums for comprehensive health insurance coverage for older, sicker individuals would significantly increase.

8. Health savings accounts (HSAs).

Health savings accounts (HSAs) would be promoted under the Republican replacement bill. The intention here is to put individuals in charge of their health care and instill a heightened sense of responsibility regarding healthcare spending.

The challenge is that HSAs can be difficult for consumers to understand, and they generally disadvantage lower-income individuals who are unlikely to be able to make contributions to HSA accounts.

9. Refundable tax credits.

An advanceable, monthly, refundable tax credit is provided to those without employer-sponsored or governmental insurance coverage. This tax credit would fund individuals’ HSAs to offset premiums and out-of-pocket costs of insurance.

The replacement bill will provide for tax credits that are fixed by age. These credits range from $2,000 for an individual under the age of 30 and a phased increase to $4,000 for an individual over age 60. The credits are lower than the costs incurred on behalf of many of those purchasing insurance on the individual market and presumably are based on the assumption that the cost of insurance will decrease with the elimination of the ACA essential health benefits.

The current age rating ratio is 1:3 and under the Republican draft bill increases to 1:5, yet the difference in tax credits is only 1:2, so the concern is that far fewer older, sicker individuals will be able to afford insurance with these tax credits. Tax credits would progressively decrease and eventually phase out for individuals with incomes greater than $75,000 and for joint filers with income greater than $150,000.

Some conservatives have criticized the refundable tax credits that can result in individuals being paid more than they have paid in income taxes as yet a new entitlement, and it remains to be seen if they will support this bill.

10. High risk pools.

The replacement bill would provide for a state grant program that would provide states with funding that they could use to establish high risk pools, create reinsurance programs, reduce cost-sharing, promote access to preventive services or subsidize providers for the provision of healthcare services. However, the amount of money that would be set aside in the draft plan is less than what most experts estimate would be necessary to make these pools financially sustainable.

12. Increase the age rating band.

Prior to the ACA, it was common for premiums for older individuals to cost five or six times the cost of that for young adults. The ACA limited insurers to charging no more than 3:1 for the oldest individuals relative to the youngest. The Republican proposal would increase this band to 5:1 in an effort to make health insurance more affordable tor young adults and to attract healthier people into the health insurance risk pools. The unintended consequence, however, would likely be significant increases in the premiums for older individuals.

13. Restrictions on special enrollment periods (SEPs).

The proposed rule would require documentation of qualifying life changes to permit an individual to sign up for insurance during a SEP. The intention is to minimize the number of individuals who wait until they are in need of healthcare services that then utilize SEPs to get insurance benefits without having consistently paid in premiums.

14. Decrease the 90-day grace period.

The proposed rule would allow insurers to terminate coverage after 30 days for non-payment of premiums.

15. Cadillac tax.

In repealing almost all of the taxes under the ACA, Republicans are faced with the dilemma of how they will pay for their plan. Savings are primarily achieved by repealing Medicaid expansion, imposing per-capita caps on traditional Medicaid funding to states, and eliminating the ACA subsidies. The one ACA tax that was kept in the replacement plan is the Cadillac tax, but its date of implementation was delayed until 2025.

21. Medicaid block grants.

The Republican bill ends Medicaid expansion as of the end of 2019. States would continue to receive the enhanced federal funding for their expansion population enrolled by the end of calendar year 2019.

After January 1, 2020, states could continue to enroll newly eligible individuals, but funding would be reduced to their standard level of federal match. A per-capita cap model of funding to states for individuals covered under Medicaid would begin in FY 2020 for each category of Medicaid beneficiary – elderly, blind and disabled, children, non-expansion adults and expansion adults. Each state’s cap would be determined using the state’s spending in FY 2016 as the base year and would increase each year by the medical care component of the consumer price index.

Conclusion

The Republican replacement bill is a draft that is likely to undergo change through the committee and reconciliation process, and how the bill is scored by the Congressional Budget Office may necessitate further changes to enable it to pass. Nevertheless, it provides a clear view of the reform features important to Republican leadership.

Here’s what we see in the replacement bill, matched to what we have heard from President Trump:

The bottom line at this point? Older, sicker, and/or poorer individuals and those who live in areas of the country with higher healthcare and insurance costs stand to lose out.