Trumpcare

DEFINITION of 'Trumpcare'

Trumpcare is a colloquial term referring to Republicans' attempts to repeal and, in some cases, replace the Affordable Care Act during the administration of U.S. President Donald Trump. Several attempts to pass laws in Congress have failed, so the White House has begun using executive orders to reverse provisions of the Obama administration's health care reform (skip to section).

BREAKING DOWN 'Trumpcare'

The Republican party has promised to repeal the Affordable Care Act, commonly known as Obamacare, since it passed without a single Republican vote in 2010. The party held dozens of votes to repeal the law during the Obama administration, sending one bill to the president's desk in January 2016 (it was vetoed).

Following the 2016 U.S. presidential elections, Republicans took control of the White House and both chambers of Congress, but repealing and replacing Obamacare has proved difficult. The party has pursued five major efforts: two broadly similar bills (one in the House, one in the Senate) that would have overhauled healthcare policy in line with Republican priorities; a repeal bill that would have removed major Obamacare provisions without replacing them; a "skinny repeal" that would have removed only Obamacare's least popular measures (from Republicans' perspective); and September's Graham-Cassidy bill, which would have turned most control of healthcare markets over to states.

The Congressional Budget Office (CBO) has estimated that each of these efforts would dramatically increase the number of Americans who lack health insurance. The reasons are varying combinations of cuts to Medicaid, changes to Obamacare's community rating requirements, reductions in premium subsidies, and the removal of incentives for healthier customers to obtain insurance.

The fourth, "skinny" repeal effort failed in July 2017. Trump then advocated putting an end to Obamacare-mandated cost-sharing subsidies to insurers, calling the payments "bailouts." The CBO found that such a policy would, paradoxically, add to the federal deficit by putting more pressure on the premium subsidies the government pays to insurers. In September Republican senators defied media pronouncements that repeal had failed, proposing a bill that ultimately failed to secure enough votes to pass. On October 12 Trump signed an executive order allowing agencies to reinterpret some Obamacare requirements; he is expected to sign another order ending cost-sharing subsidies soon. 

There have been occasional hints of a bipartisan push to reform Obamacare, though no concrete proposals have emerged. Despite enjoying net favorable approval ratings, the Affordable Care Act is widely seen as flawed: Insurers have fled its signature exchanges, particularly in rural areas, leaving residents of nearly a third of U.S. counties with only one available insurer. Premiums have risen steeply – by 116% in Arizona from 2016 to 2017.  And while a subsidy scheme limits the premiums low earners pay, those with incomes over four times the federal poverty level ($48,240 for an individual, $98,400 for a family of four in 2017) bear the full brunt of rising costs.

See below for descriptions of Republican efforts to repeal and replace Obamacare during the Trump administration.

U.S. HOUSE OF REPRESENTATIVES

American Health Care Act

House Republican leadership unveiled the American Health Care Act (AHCA) on March 6, 2017. A vote was scheduled for the 23rd, but delayed due to a lack of support from some Republicans. Trump issued an ultimatum, demanding a vote, but Speaker Paul Ryan (R-Wis.) withdrew it the following day, saying "Obamacare is the law of the land" for the "foreseeable future." 

Ryan did eventually manage to whip the votes, simultaneously placating right-wing skeptics who saw the AHCA as "Obamacare Lite" and moderates who worried about a projected surge in the number of uninsured people. To appeal to the first group, the bill was amended to let states to opt out of Obamacare's essential health benefits (EHBs), 10 conditions that all health plans are legally required to cover, including maternity care and mental health services. States could also waive community rating rules, which prohibit insurers from charging more based on pre-existing conditions: if a person let his ot her insurance lapse, the provider could charge them more based on a pre-existing condition. To earn moderate votes, $8 billion was appropriated for states that opted out of community rating.

The bill passed the House on May 4.

Provisions

Besides the amendments listed above, the AHCA contained the following major provisions:

   • Repeal the individual mandate, which levies tax penalties for failing to obtain insurance. The mandate is intended to keep younger, healthier individuals in the insurance market since their premiums subsidize older, sicker customers' cost of care. If some of these lower-risk customers were to leave, the remaining pool would be costlier, driving up premiums. That in turn would drive out more relatively healthy customers – who would take their chances without coverage rather than pay high premiums – initiating a negative feedback loop known in the industry as a "death spiral." The mandate is also necessary due to Obamacare's ban on raising premiums due to preexisting conditions: People would likely wait until they were sick to buy insurance if there were no penalty for doing so. To replace the mandate, the AHCA proposed a 30% surcharge on premiums for customers whose insurance had lapsed.

   • Repeal the employer mandate, which penalizes employers who do not provide plans meeting certain standards.

   • End states' ability to expand Medicaid under Obamacare and place a per-capita limit on federal Medicaid funding to states, with an option to receive funding as block grants. The CBO estimated that Medicaid funding would by cut by a total of $834 billion by 2026, compared to projected spending under existing law.

   • Eliminate cost-sharing subsidies (that is, discounted deductibles, coinsurance and copayments​) and change the structure of premium subsidies. The practical effect, according to the CBO, would be to dramatically increase older, low-income Americans' spending on premiums: A 64-year-old making $26,500 per year would currently pay $1,700 in annual premiums for a Silver exchange plan after tax credits; under the AHCA that figure would rise to $16,100, over 60% of their income. 

   • Repeal all new taxes put in place by Obamacare (such as a 3.8% capital gains tax on high earners), and reverse tax hikes (including an increase in taxes on unqualified HSA distributions from 10% to 20%). The exception is the "Cadillac tax" on high-cost employer-sponsored plans, which would go into effect in 2026 instead of 2020.

The CBO estimated that 23 million more people would lack insurance under the AHCA in 2026, compared to forecasts under Obamacare. Cuts to Medicaid would account for 14 million of those people. 

U.S. SENATE

Better Care Reconciliation Act

Though the broad contours of the final products are similar, the Senate did not take up the House-passed bill so much as write its own from scratch. The Better Care Reconciliation Act (BCRA) was drawn up under such secrecy that one Republican senator, Lisa Murkowski of Alaska, complained to a reporter shortly before the bill's unveiling on June 22: "I am not a reporter, and I am not a lobbyist, so I've seen nothing."

The process unfolded much as it had for the House version: Conservatives did not see the full repeal they wanted, while moderates balked at the prospect of millions losing coverage. Polling conducted in late June revealed the bill to be deeply unpopular, as the AHCA had been. Approval among all adults surveyed was 17%; even among "strong" Republicans it was just 43%.

Senate leaders pushed for a vote before the July 4 recess, but postponed it due to lack of support. A revised draft of the bill came on July 13, incorporating an amendment by Texas Senator Ted Cruz that would allow insurers to sell plans excluding EHBs and charging higher premiums based on pre-existing conditions – so long as they also sold Obamacare-compliant plans. Insurance industry groups warned that such an arrangement was "simply unworkable," as it would push healthy customers towards plans with skimpier coverage. Meantime, the sick would be forced to buy plans with community rating and EHB coverage: Premiums for these plans would skyrocket since the insurance pool would not have healthy customers to subsidize treatment for the sick.

Moderates, meanwhile, were offered a $45 billion appropriation for opiate-addiction treatment programs. Within four days the bill was declared dead, as four GOP senators said they would not vote for it. 

Another round of amendments reversed the planned repeal of two Obamacare taxes – a capital gains tax and a payroll tax – that previous versions would have eliminated. They also pared back Medicaid cuts slightly. On July 25 the Senate voted 51-50 to start debate, but the bill itself was rejected handily, with 43 senators voting for it and 57 against it. The tally would not have satisfied the 50-vote requirement to pass under reconciliation, but the Senate parliamentarian ruled that parts of it did not qualify for the expedited process anyway, meaning it would have needed 60 votes to pass in full.

Provisions

Besides the amendments listed above, the BCRA contained the following major provisions:

   • Repeal the individual mandate and replace it with a six-month waiting period for customers whose insurance had lapsed.

   • Repeal the employer mandate.

   • Phase out Medicaid expansion and place a per-capita limit on federal Medicaid funding for states, with the option to take funding as block grants. The CBO estimated that Medicaid funding would be cut by a total of $756 billion by 2026, compared to projected spending under existing law. Largely absent from this analysis, though, is the fact that per-capita limits would be indexed to overall consumer price index (CPI) inflation in 2025. Since this index has risen much more slowly than its medical component, cuts to Medicaid would be compounded over time.

   • Lower the actuarial value – the percentage of costs a plan covers on average – used to determine premium subsidies from 70% to 58%; limit eligibility for subsidies to those earning three-and-a-half times the federal poverty level or less (the current cutoff is four times).

The CBO estimated that 22 million more people would lack insurance under the BCRA in 2026, compared to forecasts under Obamacare. Cuts to Medicaid would account for 15 million of those people.

Obamacare Repeal and Reconciliation Act

Senate Republican leadership expected the BCRA to be defeated – though they may not have expected nine Republicans to vote against it – and they quickly followed up with a vote on "partial repeal," the Obamacare Repeal and Reconciliation Act (ORRA) they had unveiled the previous week. It resembled the repeal bill that Obama vetoed in early 2016, and the CBO found that it would have led 32 million more people to lack insurance in 2026, compared to forecasts under current law. Average premiums in the nongroup market, which includes the Obamacare exchanges, would roughly double by that year.

The bill would not have reversed all of Obamacare's reforms, since the reconciliation process would not allow it: Children would still be able to stay on their parents' health plans until age 26, for example, and community rating would stay intact. Most major provisions would go, though, including new and increased taxes, penalties for violating the individual and employer mandates, Medicaid expansion and premium subsidies.

Trump had encouraged legislators to repeal Obamacare without providing a replacement –

– but when the proposal came to a vote on July 26, it was rejected 45-55.

Health Care Freedom Act

"Skinny repeal," as the Health Care Freedom Act came to be known, followed "partial repeal." It was less sweeping in its attempts to unravel Obamacare: it would have done away with penalties for violating the individual and employer mandates; delayed the implementation of certain Obamacare taxes; and expanded section 1332 or "state innovation" waivers, which allow states to modify EHBs. 

The bill failed by a vote of 49-51 on July 28. The decisive "nay" was cast by Senator John McCain (R-Ariz.), who had cast the decisive "yea" in favor of opening debate on healthcare three days earlier.

Graham-Cassidy Bill

In September Senators Bill Cassidy (R-La.) and Lindsey Graham (R-S.C.) proposed a bill that would devolve much of the responsibility for regulating health insurance to the states. The bill received a truncated CBO score on September 25, which showed that it would reduce the federal deficit by $133 billion over 10 years. Due to the limited time frame, the analysis did not include precise estimates of the bill's effects on health insurance coverage, but said that "the number of people with comprehensive health insurance that covers high-cost medical events would be reduced by millions compared with the baseline projections for each year during the decade."

The day the CBO's analysis was published, Senator Susan Collins (R-Maine) joined Senators Rand Paul (R-Ky.) and McCain in opposing the bill, causing the vote to be cancelled. (See here for more information on the Graham-Cassidy bill's provisions.)

Executive Orders

Cost-sharing Subsidies

The day after skinny repeal failed, July 29, Trump tweeted that "BAILOUTS for Insurance Companies … will end very soon!" The president was referring to federal subsidies for insurers who provide plans with reduced deductibles and copayments, which are required by Obamacare. Cost-sharing reduction, as the discount to customers is called, benefits those earning up to twice the federal poverty level. Since it cuts into insurers' profits, the law compensates them for the added cost.

It was reported on October 12 that Trump planned to sign an executive order scrapping cost-sharing subsidies, raising fears that insurers would drastically raise premiums to cover the increased cost of providing coverage.

Background to the Cost-sharing Subsidy Cut

The House of Representatives sued the Obama administration over cost-sharing subsidies to insurers in 2014, alleging that they were unconstitutional. A federal judge upheld the challenge in May 2016, but allowed the subsidies to continue while the administration appealed. Six months later Trump was elected president, and a court stayed the appeal until his inauguration. 

On August 15 the CBO released an analysis showing that gross premiums for benchmark Silver exchange plans would be 20% higher in 2018 and 25% higher in 2020, if cost-sharing reduction payments were ended. The actual premiums paid by low-income customers would not increase since higher premium tax subsidies would kick in. Rather, the federal government would bear the cost, leading the federal deficit to rise by $194 billion by 2026. The CBO forecasts that some insurers would withdraw from the exchanges in some areas due to uncertainty, but would return once it became clear that the policy would not destabilize the market.

Stripped-down Insurance Plans

The same day that the White House's plans to end cost-sharing subsidies emerged, Trump signed an order instructing executive agencies to expand the roles of Association Health Plans (AHPs) and short-term limited duration insurance (STLDI). The order argued that the first action would fulfill a Trump campaign promise by allowing "American employers to form groups across State lines." The second would allow the sale of plans that are exempt from certain Obamacare requirements. The order said these actions would "increase the healthcare choices for millions of Americans," but critics deride the expanded offerings as "junk" insurance.

Prior to the passage of Obamacare, AHPs – which have generally been used by associations of small businesses such as farm bureaus – were allowed to choose which state's laws they would follow. The result was generally cheap plans with limited coverage. Obamacare forced AHPs to cover essential health benefits, a provision that the recent order might succeed in reversing. The order may also relax rules requiring that the plans' customers be members of a given trade association, allowing cheap AHPs with bare-bones coverage to claim a significant chunk of the health insurance market and drive up premiums for those who need more extensive coverage.

The new regulations resulting from the orders will be subject to a period of public comment before taking effect and will probably face legal challenges, meaning they will take months to go into effect, if they do at all. Even so, the order may have more immediate effects on insurance markets, which have already been buffeted by the uncertainty surrounding the future of federal healthcare laws and regulations.