3 Groups That Will Lose Big-Time if the Obamacare Replacement Bill Passes

By Sean Williams Markets Fool.com

During his campaign, Donald Trump made dozens of promises that he pledged to keep once in office. Yet, throughout his journey, repealing and replacing the Affordable Care Act (ACA), better known as Obamacare, always took precedence.

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Obamacare has, in its own right, been a partial success. According to the Centers for Disease Control and Prevention, it wound up lowering the uninsured rate in the U.S., inclusive of Medicare patients, from 16% to less than 9%, an all-time low. Unfortunately, Obamacare wasn't a sustainable business model for insurers, and consumers have begun to suffer from substantially higher premium costs. With Trump's victory in November and Republicans retaining control of both houses of Congress, Obamacare's demise was all but etched in stone.

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Republicans unveil what could become "Trumpcare"

The big question since Nov. 8 has been what a Republican Obamacare replacement bill would look like. On Monday, March 6, we got that answer.

While you can read a considerably more all-encompassing review of what will be changed and what stays the same, here's a bulleted rundown of the most important components.

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  • It eliminates the individual and employer mandates, as well as the subsidies associated with the ACA and the Shared Responsibility Payment.
  • Subsidies will no longer be based on income. Instead, they'll be replaced with tax credits based on age, with older adults qualifying for larger tax credits.
  • Health savings account annual contribution limits will nearly double.
  • Medicaid expansion will end by 2020, and Medicaid funds will be disbursed on a per-capita basis to states.
  • Insurers will be allowed to charge a 30% premium to consumers who weren't insured in the prior year. This surcharge ends once a consumer has a year of continuous coverage.
  • Establishes the Patient and State Stability Fund to help treat high-risk patients.
  • Maintains two popular Obamacare mandates requiring insurers to accept people with pre-existing conditions and allowing dependents to stay on their parents' plan until age 26.

As noted above, there are additional points, but this should give you a pretty good rundown of the Republican Obamacare replacement bill that could become Trumpcare.

In many respects, the GOP bill is intriguing. It would likely reduce government spending on healthcare, which is a critical component to reducing the federal budget deficit. It would also be a positive for healthier young adults, who would presumably have more choice as insurers would have more freedom to adjust their premiums and deductibles. Under the GOP plan, a 27-year-old earning $40,000 would get a $2,000 annual tax credit, whereas a 27-year-old making $40,000 annually would only net $103 in subsidies under Obamacare, based on a Kaiser Family Foundation analysis.

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Three groups that would be notably worse off

However, Trumpcare isn't necessarily an improvement for everyone. Here are three groups that could find themselves on worse footing if the current bill is passed through Congress and signed into law by President Trump.

1. Low-income individuals and families

Arguably the biggest criticism of the Republican Obamacare replacement bill is what it might do, or fail to do, for lower-income individuals and families.

Under the ACA, Medicaid expansion allowed around 11 million low-income people to gain coverage in the 31 states that chose to take federal funds and expand their Medicaid programs. Typically, Medicaid coverage kicks in for those individuals and families at or under 100% of the federal poverty level; the expansion allowed those earning up to 138% of the poverty level to be completely covered as long as their state participated.

Trumpcare is going to end the ability of states to expand their Medicaid programs by 2020, and it's also going to dole out Medicaid funds to states on a per-capita basis. Long story short, states would have to come up with the funding difference if they want current Medicaid enrollees to remain on their plans, or, as is more likely considering the poor financial shape of most state budgets, cuts will need to be made. This will almost certainly mean a reduction in the number of low-income folks who'll qualify for Medicaid.

Also, the tax credits simply may not be enough to coerce certain lower-income people to enroll. The same aforementioned Kaiser Family Foundation study found that a 27-year old and 40-year-old earning $20,000 a year would only get $2,000 and $3,000 in respective tax credits under Trumpcare, but would have received $3,225 and $4,150, respectively, under Obamacare.

Between higher premiums costs and potentially more out-of-pocket costs for doctor visits, low-income folks may not be satisfied with the Republican Obamacare replacement plan.

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2. Baby boomers

Another group of people that could face a double-whammy are older adults who don't qualify for Medicare (think baby boomers up to age 64).

The biggest concern for boomers is that the Republican ACA replacement plan offers a major concession to insurance companies to help make offering insurance more sustainable. Under the ACA, insurers weren't allowed to charge older adults more than three times as much as younger adults. With Trumpcare, this figure inflates by 67%, so that older adults can now be charged premiums that are up to five times higher than that of younger adults. This move was made because older adults are likely to be sicker and cost insurers more money.

In return, baby boomers just aren't going to be compensated anywhere near what they were under Obamacare. Despite the age-based tax credit max-out at $4,000 for people in their 60s, a low-income senior in their 60s would get nearly $9,900 in annual subsidies under Obamacare according to the Kaiser Family Foundation.

Baby boomers already have a saving problem, and higher healthcare costs aren't going to help their cause one iota.

Image source: Getty Images.

3. Individuals and families living in rural communities

Finally, the Republican Obamacare replacement bill is probably bad news for folks who live in rural communities.

It's no secret that health insurance premiums can vary wildly based on where you live. Generally speaking, premiums tend to be lower when you live near heavily populated areas since the infrastructure and technology needed to seek and get medical treatment is accessible. Conversely, if you live in Alaska or Wyoming, which are both sparsely populated states relative to their size, health insurance premiums can be considerably higher than the national average. Some specialized treatments could require patients to be flown out of state at the expense of the insurance company.

Under Trumpcare, consumers are going to simply get a flat tax credit based on their age, which isn't going to do much for folks who live in rural communities, who'll likely be charged much more than people who live near bigger cities.

It should be noted that while the Republican replacement bill has been proposed, it, like any other proposal, isn't set in stone. A few conservative Republicans in Congress, along with most Democrats, have already rebuffed some of the components of this replacement bill. We're probably going to see some adjustments made in the weeks to come if it has any chance of making its way to President Trump's desk. It's always possible things could improve for the aforementioned three groups, but I wouldn't hold your breath.

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