As I noted in an earlier post, I’ll be spending the next few weeks examining some of Trump’s policy proposals, such as they are.

“Repealing and Replacing” Obamacare with HSAs

In addition to setting up competitive health insurance marketplaces, the Affordable Care Act provides subsides to low-middle income people to help them afford health insurance. Trump’s  plan does not address the needs of this population. The President-elect’s proposal to repeal the ACA, thereby eliminating the Marketplace subsidies and the Medicaid expansion, [1] and replace it with Health Savings Accounts (HSAs) and High Deductible Health Plans (HDHPs) will leave millions of middle class, low income, and impoverished Americans without access to affordable healthcare and clearly works against his stated goal to “broaden healthcare access, make healthcare more affordable and improve the quality of the care available to all Americans.”

Currently, the ACA limits the amount that low income [2] people on Silver Plans will have to pay, and provides pretty generous cost sharing reduction subsidies and limits for numerous healthcare price points: deductibles, copayments, coinsurance, and the out-of-pocket maximum. This is particularly beneficial for low income people with chronic illnesses, and for people living in the 38 states that chose not to expand Medicaid, strongly incentivizing them to select Silver Plans.  With these substantial limits and subsidies gone, low income families people (especially those families with ongoing healthcare needs) will have to pay much more out of pocket for healthcare. Trump has no plan to subsidize low income people and some of the replacements propose smaller subsidies based on age instead of income – a regressive policy that harms the poor.

Additionally, The ACA caps premiums on a sliding scale based on income. For people at 399% of the poverty level (In 2017, 47,520 for an individual 97,200 for a family of four), the maximum they could have to pay in premiums was capped at 9.69%. With the ACA gone, individuals and families making less than these amounts, [3]  will have to pay a much higher percentage of their income in health insurance premiums than the law currently allows. [4]

Although, High Deductible Health Plans (HDHPs) promise lower premiums, eliminating the ACA subsidies will mean that people who need good health insurance will have to choose between:

A.    Switching to high deductible plans to maintain the price points of their premiums, leading to higher deductibles, higher out-of-pocket maximums, and higher costs for healthcare.
B.    Keeping an approximation of their current insurance, but paying the premiums at the unsubsidized, and drastically higher rate.
C.    Switching to less expensive, lower quality plans that cover a small share of possible health expenses.

All of this is fine for people who aren't sick, but for people with chronic illnesses, it is akin to saying "pay for exorbitantly expensive treatment or pay for exorbitantly expensive insurance."

Moreover, without an individual mandate, there would be little reason for healthy people to buy insurance, even HDHPs. If the current ACA mandate isn’t compelling healthy people to buy insurance, I’m skeptical that no mandate would do a better job. Even though it will require some political gymnastics to pull of, some replacement plans suggest mandating that Americans with preexisting conditions maintain continuous coverage or face being denied access to affordable rates when they do choose to purchase insurance. I’m also skeptical that a mandate that only applies to sick people will be effective in getting healthy people to maintain coverage. Unfortunately, it seems complicated enough to be politically feasible; the GOP will say:

There’s no more mandate! *

Under Trump’s proposal, the middle class, especially people with chronic illnesses, will find it difficult to afford medications and medical treatment. Trump intends to let individuals and families take advantage of HSAs. However, HSAs aren’t health insurance, do little to lower costs, and consumers chronically underfund. [5]  As a theoretically low-cost accompaniment to HSAs, Trump’s plans proposes High Deductible Health Plans [6]  which will be subject to the same death spiral of rising costs and sicker consumers that the marketplace plans currently face. The GOP’s possible replacements for the ACA will likely death spiral without an individual mandate like the ACA’s and their suggested mandate would actually be more draconian and less effective. But hey, at least Obamacare’s repealed.

*But if you get sick you can't get affordable insurance for 18 months.

[1] Obamacare also dictated that states expand Medicaid to cover people with higher incomes than it had previously covered. In 2012, the Supreme Court ruled that states could not be compelled to expand coverage, and many Republican-led states chose not to.

[2] In this case "low-income" means people making between 100% and 250% of the Federal Poverty Level, for example:

• For a single person in Virginia this is $11,880 - $29,700; $24,300 - $60,750 for a family of four
• For a single person in Indiana this is $16,394 - $29,700; $33,534 - $60,750 for a family of four

[3] This is to say, with the ACA gone, individuals and families making less than the above amounts but not eligible for Medicaid (which will be available to even fewer people than it is today) will lose insurance subsidies.

[4] Millions more people, once eligible for Medicaid under the ACA’s checkered expansion of the state-run program, will lose coverage because states will no longer have matching federal funds to administer the expanded program.

[5] According to a recent survey of small, midsize, and large companies only “42% of the maximum amount allowed to HSAs was contributed by HDHP participants” in the employer market. Again, I’m skeptical that individuals making under $50,000 will do a better job saving for their future health costs than that. Science tells us that humans are terrible about predicting future risks and Americans are already saving far too little for known expenditures like retirement. 

[6] Which, again, are already available.