The Republican plan to redo the Affordable Care Act was supposed to quell months of speculation about the future of former President Barack Obama’s signature health care law.
Instead, since its late Monday release, the proposal has only raised more questions about how it will affect the 20 million Americans who bought health insurance through exchanges set up under the law, known popularly as Obamacare, or who were covered through an expansion of the low-income Medicaid health program. About 5 million of those newly covered people are Californians.
On top of that, the proposal could affect some people who have insurance through their employers.
Here are a few explanations of the law and its potential consequences on California:
Q. If the federal overhaul passes, could California go it alone with its own system? What are its options for that?
A. Few options are on the table, but more would certainly emerge if Congress and President Donald Trump enact anything resembling the House Republican proposal.
A bill introduced last month calls for creating a government-run health care system but lacks details. In a press release Monday, state Sen. Ricardo Lara, D-Bell Gardens, said the proposed Californians for a Healthy California Act would “cover the millions of Californians who will lose insurance or pay more under Republicans’ plan.”
Yet there are no simple state policy or fiscal substitutes for the federal law’s main components, nor was there a clear picture Tuesday of how quickly changes would phase in.
“We know from experience it’s awfully hard to do expansion without the federal government as a partner,” said Anthony Wright, executive director of Health Access, who has worked on multiple efforts to reduce the state’s uninsured population.
Q. What are the political hurdles for creating a California-only health exchange or adopting a single-payer system?
A. In almost 20 years, only two bills to significantly expand health care coverage in California have cleared the Legislature. Neither became law.
The first, SB 2, in 2003, would have imposed a new fee on employers to provide coverage to an estimated 1 million uninsured workers. Voters voided it a year later. In 2006, then-Gov. Arnold Schwarzenegger vetoed SB 850, which would have created a government-run health care system.
Several other attempts have stalled, including a Schwarzenegger-sponsored effort that featured an individual mandate similar to what became the foundation of the Affordable Care Act.
All were undone by the thicket of multiple influential special interests with a stake in the health insurance market, from businesses and unions to health plans, hospitals and doctors.
“You can get people to focus on the need for change,” said political consultant Larry Grisolano, who led the unsuccessful effort to uphold SB 2 in 2004. “It is much more difficult to get a majority behind any given change.”
Q. How much would the California state budget have to pay to maintain the expanded Medi-Cal roles authorized by Obamacare, and where would it get that much money?
A. Gov. Jerry Brown’s budget proposal for the next fiscal year reflects $17.335 billion in federal money to help pay for 4.1 million people added to Medi-Cal under the Affordable Care Act. That represents about 94 percent of the cost, with the the federal share declining to 90 percent by 2020.
Under the current House bill, that generous assistance would continue for three years, but the federal share would drop to 50 percent in 2020 for new patients or those who let their coverage lapse. The state would need to pay billions of dollars to maintain the current coverage.
Where that money would come from, no one knows. The $2-a-pack tobacco tax increase passed by voters last November, for example, will generate an estimated $1 billion for Medi-Cal in the coming fiscal year.
“We’ll obviously re-evaluate,” said Assemblyman Phil Ting, D-San Francisco, the chairman of the Assembly Budget Committee. “There are limitations based on state funding.”
State Sen. Holly Mitchell, D-Los Angeles, said Medi-Cal costs would have to be considered for funds along with other health and welfare programs facing potential cuts, such as in-home services for the elderly, blind and disabled.
“When I think of the cumulative effects, it keeps me up at night,” Mitchell said.
Q. The GOP proposal drops the mandate that all U.S. businesses with more than 50 full-time-equivalent employees must offer health benefits. In the big picture, how will that affect health coverage in California? Will employers, for instance, drop coverage?
A: Not likely. Experts say most large companies already offered health insurance to employees.
“I don’t expect lots of change,” said Gerry Kominski, director of the UCLA Center for Health Policy Research, in an email. “I haven’t seen any measurable increase in employment-based insurance because of the (Affordable Care Act), so repealing the employer mandate won’t have much of an effect.”
About 93 percent of U.S. companies with 50 employees or more offer health benefits to at least some employees, according to the 2016 survey by the Henry J. Kaiser Family Foundation, which interviewed more than 1,900 large and small firms. That coverage varied by employer size: Nearly all employers with more than 1,000 workers offered health insurance, compared with only 46 percent of employers with three to nine workers.
“Certainly, some companies, especially those that hire large numbers of low-wage workers, such as small retailers or restaurants, may drop coverage,” said Gary Claxton, director of the Kaiser Family Foundation’s Health Care Marketplace Project, which analyzes trends in health care reform. “There’ll be a little bit of reduction but not by many large employers or those with (large numbers of) employees.”
For the vast majority of workers, the repeal of the employer mandate won’t have an effect.
“But there are a small percentage of workers whose employers are likely only offering coverage because of the requirement,” said Laurel Lucia, health care program manager for the UC Berkeley Labor Center. “Their employers may decide to stop offering coverage if the mandate is repealed.”
Q. The new proposal changes how tax credits are used to help consumers pay for their health insurance. Who are the winners and losers under the new scenario?
A. Under Obamacare, the federal tax credits were based on age, family income and the cost of premiums where people lived. Under the new proposal, the credits are based primarily on age and don’t vary with income or geographic location.
“People who are older, lower-income and living in areas with higher premiums are most likely to be worse off under the House bill because (Obamacare) tax credits are based on the premium where you live. In the House bill, they’re flat, so don’t adjust for where you live,” said Claxton of Kaiser Family Foundation, which just released a comparison of tax credits between the Affordable Care Act and the GOP plan.
In California, winners could include single people with incomes above $46,000 and less than $115,000, who will now be eligible for tax credits when they file their taxes, said Kominski. Also, younger people in some Southern California counties will benefit, as will those with incomes above $200,000 ($250,000 for couples) because the GOP plan repeals certain Medicare and investment taxes, Kominski said.
Losers, he said, will likely be residents in urban areas and most of Northern California, because the proposed tax credits don’t recognize higher medical costs and premiums in those places.
Q. The so-called Cadillac tax, which would levy a 40 percent tax on employer-provided health benefits above a certain amount, has been pushed off to 2025. Why and what does that mean?
A. Enacted to help pay for Obamacare, the Cadillac tax is intended to discourage employers from offering health insurance benefits deemed overly generous. Under the Affordable Care Act, a 40 percent tax would be imposed on benefits exceeding $10,800 for individual coverage and $29,999 for family coverage.
Widely disliked by employers, it was one of the few pieces of Obamacare hated by Republicans and Democrats alike. During the presidential campaign, both Republican Trump and Democrat Hillary Clinton vowed to eliminate it entirely.
The tax was originally set to debut next year but was recently postponed until 2020. Under the new GOP legislation, it’s been pushed back another five years, to 2025.
“It’s a classic ‘kick the can down the road’ strategy to avoid dealing with the issue of taxing ‘excess’ health benefits,” said UCLA’s Kominski.
Many predict that when the Cadillac tax is imposed – not for another eight years under the current proposal – employees will see either their paychecks or their health benefits reduced.
“It’s a tax on the employer, but it ends up on the backs on employees. If you impose a 40 cent tax on a benefit, you’re going to lose a benefit,” said Kaiser’s Claxton. “They would see their compensation or benefits reduced.”
Sammy Caiola contributed to this story.