Senate Republicans have worked tirelessly behind closed doors since the May 4 passage of the House RepubliCare bill, drafting the Senate version of their bill. They dropped their top secret bill on us only three days ago (June 22). They will drop the CBO scoring on us tomorrow (June 26). They plan to ram the bill through a vote by June 29. Lawmakers, analysts, journalists, activists, and constituents have all been struggling to choke down and digest this enormous chunk of information – which is the idea.
The intent of this article isn’t to rehash all the problems that many people already understand. We already “get” that the bill does things like robbing almost a trillion dollars of health benefits from the poor and handing all the loot over to the wealthy in targeted tax cuts. Instead, let’s focus on the sneakiest aspect of the bill – an obscure section of code called Section 1332.
Originally, Obamacare’s Section 1332 put forth a sincere and collegial challenge to state governments: They could opt out of Obamacare (receive a “state innovation waiver”) if they could design an alternative plan meeting the following conditions:
“provide coverage that is at least as comprehensive as” required under the 10 Essential Health Benefits
“provide coverage and cost sharing protections against excessive out-of-pocket spending that are at least as affordable as the provisions of this title would provide”
“not increase the Federal deficit”
Ever since Obamacare was passed, there have been back-room murmurings among conservatives about Sec. 1332 being an “escape hatch.” There have even been a few proposed programs. In the end, however, discussions conclude this is a “fool’s errand.” No plan can perform as well as Obamacare without burdening state taxpayers.
Republican senators have now found a way to deal with the frustrating performance benchmarks of Section 1332: They simply eliminated them. They also modified the language to open up large swaths of the Obamacare bill to modification by this waiver. And thus they morphed Section 1332 into a Trojan horse that would quietly slip into law. Once triggered, it would allow the unwinding of most of our hard-fought consumer protections under Obamacare and allow Republicans to rob even more subsidy assistance (e.g. tax credits) away from the poor and middle class. Under Section 1332, states would have the authority to waive the ACA’s Subtitle D parts I and II, and Section 1402, as well as Sections 36B, 4980H, and 5000A of the Internal Revenue Code of 1986. This would give them broad authority to change (among other things):
the definition of a “qualified plan”
the “10 Essential Health Benefits”
the “individual mandate”
the “employer mandate”
annual or lifetime benefits caps
cost sharing reductions
refundable tax credits
If you don’t understand all that, you’re not alone. Lawmakers are counting on you to be confused and to give them a free pass, but we’re going to break this down for you:
Definition of a qualified plan: Think of this almost like an accreditation standard. An insurance plan must meet certain standards to qualify for things like tax credits. States would be able to change those standards.
The “10 Essential Health Benefits”: Under Obamacare, qualified plans must cover a very comprehensive list of benefits that are, essentially, everything you would ordinarily think a good insurance policy should cover. This includes doctor’s office visits, emergency services, hospitalization, drugs, etc. In Section 1332 opt-out states, Republicans could slim down this list, so that expensive things like maternity/newborn services and prescription drugs aren’t covered. And in most states, they would likely exclude certain expensive illnesses the insurance companies would rather not cover – cancer, heart disease, diabetes, etc. – all the illnesses for which people were denied insurance coverage prior to Obamacare. So even though someone with cancer might be able to buy insurance, the plan would not cover cancer. Sneaky? You bet! Although it might be possible to buy a cancer rider for the policy, it would cost about what treatment does -- as much as $150,000 per year. It is through this provision that health insurance would fail to protect us from major medical conditions, leaving us exposed to bankruptcy and loss of access to medical care.
Individual and employer mandates: Most people don’t understand or like the individual mandate, a subject deserving its own article. Simply put, you have to buy insurance, or you pay a fine to the IRS. Americans do like the employer mandate, though. It says a business of a certain size has to provide insurance to its employees. Under Section 1332, that could be gone. Employees might have to find their own insurance.
Out of pocket maximums: This consumer protection under Obamacare ensures that people with high medical expenses only have to pay up to a certain limit, before the insurance company takes over and pays everything else. Prior to Obamacare, people would commonly keep paying 30% of the tab, with no end in sight, until they went bankrupt. Those days could be coming back.
Annual and lifetime benefits caps: Unlike out-of-pocket maximums that protect consumers, benefits caps protect the insurance companies by letting them stop paying out for an expensive medical condition once a certain limit has been reached. Obamacare prohibits this practice, but states would be able to lift the prohibition.
Cost sharing reductions: Under Obamacare, low-income Americans can buy partially subsidized policies that lower their total out-of-pocket expenses. This is done by lowering deductibles, co-payments, etc. Republicans could bring this to an end. Even worse, they could rewrite the law to divide subsidies evenly between everyone or even give them primarily to the wealthy. Nobody knows.
Refundable tax credits: Under Obamacare, middle and lower income Americans get premium assistance in the form of pre-payable, refundable tax credits called “premium reduction subsidies.” RepubliCare would provide these same tax credits, except reduced and distributed differently. Under the federal Senate plan, there would be enhanced assistance to the poor, but this could change under a Section 1332 opt out. States could instead spread the tax credits evenly between people of all income levels, effectively eliminating targeted assistance to the poor. Even worse, they could apply the tax credits in a way that disproportionately benefits the wealthy. Or they could use them for something besides tax credits.
Religious exemptions: This section of Obamacare code, entitled “Special Rules,” addresses the sticky abortion issue. Under subsection (a)(1), it allows insurance companies not to cover abortion services. Under (a)(3), it allows health care providers and facilities to deny abortion services, free from recrimination, based on moral and religious beliefs. It would be easy for an opt-out state to insert other religious exemptions in this section, for instance allowing insurers to refuse policies to certain people they have deemed as “high risk” (e.g. LGBT people), ostensibly on the basis of deeply held moral or religious beliefs -- or allowing medical personnel or facilities to deny treatment to LGBT people for moral or religious reasons. If this sounds far-fetched, remember that insurance companies refused to insure certain classes of LGBT people prior to Obamacare. And many LGBT people do not have access to health care even when they are able to pay. This bill could provide a path for elimination of what few legal remedies they have.
The Senate majority is counting on you not to understand what Section 1332 does. They are assuaging the fears of their constituents with soothing words about the bill having more “heart,” while simultaneously handing states a big knife to cut the heart out. At that level, there will be less debate, less transparency, and more confusion. And there will be no CBO to warn us how citizens will be impacted. When all is said and done, many or most states may turn the clock back to the 2000’s. Although everyone would be able to buy insurance at an affordable rate, most policies in Section 1332 opt-out states would return very little value for the money. They would cover only the cheap things, leaving consumers unprotected against the more serious expenses with page after page of mind-numbing fine print. People earning enough money to buy insurance would receive tax credits, of course, but perhaps not as much as they had expected. They wouldn’t understand most of the tax credits were given away to the wealthy. We don’t know for certain what perils lay ahead with passage of the RepubliCare bill. We only know what sections of code lawmakers want states to control, and we are left to speculate why. Each American must decide whether to trust our state lawmakers with this blank check under Section 1332.
(Released June 25, 2017. Edited July 10, 2017 to provide clarification on Sec. 1303.)
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