Industry questions higher insurance costs under Republican plan


The House Republican health insurance plan suggests health insurance after Obamacare will be less affordable, investors, insurers and industry sources said on Tuesday, raising questions about future enrollment and insurance company participation.

The draft legislation, released on Monday night, rolls back some of the key tenets of former President Barack Obama's signature healthcare law, known as Obamacare, including the individual mandate and the expansion of Medicaid. In addition to eliminating the requirement that most Americans obtain medical insurance, it creates a system of new tax credits to coax people to purchase private insurance on the open market.

The bill has the support of President Donald Trump, who has vowed to repeal and replace the 2010 law. But some Republican lawmakers whose support is needed for the final legislation - and Democrats - said they wanted details on how it would affect U.S. consumers.

Under the draft legislation, Obamacare���s income-based and location-based tax credits are replaced by credits with fixed amounts up to a maximum income level.

Because the bill has just been proposed and aims mostly to repeal the existing law rather than introduce new policies, it is unclear exactly how future changes could make the plan affordable and draw insurers into the market.

But some initial reaction, particularly from hospitals, was critical. The American Hospital Association said in a letter to Congress that it could not support the draft legislation in its current form.

The BlueCross BlueShield Association, which represents BCBS insurers across the country that cover the vast majority of the about 10 million people enrolled in 2017 Obamacare plans, said the insurers were glad to see the extension of many Obamacare aspects into 2019. But it emphasized the need for the replacement to be affordable.

"It is important that the tax credit for 2020 creates a marketplace that enables people to get the coverage they need at a price they can afford," BCBSA Senior Vice President Alissa Fox said in statement.

The Association for Community Affiliated Plans, which represents health plans serving Medicaid for the poor and other public health programs, said it was concerned the structure would raise costs for people currently in the marketplace.

Because insurance costs, healthcare costs and incomes vary so dramatically around the country, the new tax credit would affect some people more than others.

"I think there's a reasonable concern that people in high-cost states who are lower income will have a hard time finding affordable care," said Paul Howard, director of health policy at the conservative Manhattan Institute.

But the draft legislation also sets up a $100 billion fund over 10 years that states could use to structure subsidies for their members and offset some of that, he noted. Insurers have also asked to be able to offer plans with fewer benefits that could be sold at lower prices, Howard said.

Since the draft removes the mandate requiring people to have insurance, the impact on enrollment from that measure is not clear.

Standard & Poor's estimated that the draft plan would reduce individual enrollment, now at around 10 million, by 2 to 4 million people.

Steve Brozak, managing partner at WBB Securities, said he believed that under the Republican package, "people will be forgoing insurance."

He also said that, as it is currently designed, insurers will have difficulty attracting people who do not have an immediate need for healthcare, like younger, healthy people who are less expensive to insure.

Still, Brozak expects that this draft is only a first step and likely to change. It is expected to be voted on this month in the House before moving to the U.S. Senate.


The draft plan, along with Republicans' proposed restructuring of the Medicaid program for the poor and the loud opposition from some Republican lawmakers, created uncertainty that drove down shares of hospitals and insurers.

Republicans will need the buy-in from BlueCross BlueShield insurers like Anthem Inc, particularly after UnitedHealth Group Inc , Aetna Inc and Humana Inc exited most of the states where they sold individual insurance plans under Obamacare.

Shares of hospital operators sold off, with Community Health Systems down more than 8 percent and Tenet Healthcare off 7 percent. Reaction in health insurer stocks was more subdued. Molina Healthcare fell 1.3 percent and Cigna dropped 1 percent, while Humana gained more than 2 percent and Anthem was little changed.

The American Hospital Association and the American Medical Association, which represents doctors, declined to comment on the draft legislation.

Support for government-run health insurance has risen over the past five years, according to the Reuters/Ipsos national tracking poll.

Between February and March, 47 percent of Americans said the government should have at least a ���major role��� in providing health insurance. That was up from 39 percent who answered the same way when the poll first asked the question in January 2012.

The Reuters/Ipsos poll is conducted online in English in all 50 states. The latest poll ran from Feb. 25 to March 6 and included responses from more than 2,700 American adults. It has a credibility interval, a measure of accuracy, of 2 percentage points.

(Reporting by Michael Erman, Lewis Krauskopf, Caroline Humer, Rodrigo Campos and Charles Mikolajczak in New York; Editing by Dan Grebler)