Like Obamacare, But Worse: The GOP ACA Healthcare Bill Explained, Part 1

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People protest Trump administration policies that threaten the Affordable Care Act, Medicare and Medicaid, near the Wilshire Federal Building on January 25, 2017 in Los Angeles, California. / AFP / DAVID MCNEW (Photo credit should read DAVID MCNEW/AFP/Getty Images)

The GOP plan to replace premium subsidies under Obamacare with “refundable tax credits” is a significant change in how Obamacare works for its enrollees – and not in a good way.

Maybe some of you heard that Paul Ryan and his GOP colleagues released a proposal for their Obamacare/ACA replacement/repeal plan last night.

I have worked with health insurance for more than a decade, and I’m also an ACA enrollee. Therefore, the insurance/ACA jargon that’s unfamiliar to a lot of people is like a second language to me.

So, I’m going to write a few (long, but hopefully readable) posts explaining what the Republicans are proposing, and what that means to people who need health insurance. I’ll break them up into manageable pieces covering different elements of the ACA.
Keep in mind that – politics aside – the major goal of the ACA is to reduce the number of uninsured people in the US. The second important point to understand that the private health insurance exchanges only work well if there are a LOT of people enrolled in them – especially younger and healthier people.

Subsidies and Refundable Tax Credits

So first, let’s tackle the concepts of subsidies and refundable tax credits. If the GOP proposal goes into law, the former will be replaced with the latter.

(Is your brain glossing over already with the jargon? Stick with me! You can do it!)

So currently, if you need an ACA plan, this is what happens. You go to healthcare dot gov or your state exchange site, and you fill out an application for coverage. The application is short, but one of the things they do ask you about is your family size and income. Based on those answers, many ACA enrollees qualify for a subsidy to help them pay their premiums. And the way those subsidies work is that they are applied to the premium bill *immediately.*

So if you are approved for a $150 per month subsidy on your premium based on the income you report on your application, you will only pay $200 a month for a $350 a month plan, or $400 a month for a $550 a month plan, or whatever.

Whatever it is, you will get that subsidy *each month* on your premium bill. The policy I buy on the exchange costs about $320 a month. I don’t get a subsidy. Someone else my age who makes less money would get a subsidy for that same policy, so they might only pay $140 a month for the same exact policy I have. Or $80. Or maybe almost nothing. (The subsidies, theoretically, have no limit.)

But these subsidies, since they apply every month, make it more affordable for lots of people to buy policies because their monthly bills are lower. And remember – we want maximum enrollment in order for the exchanges to run well.

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