On Monday 7 March, 2017, the House GOP unveiled its plan to repeal and replace Obamacare. Obama’s signature healthcare mandate required nearly all Americans to purchase health insurance, using the proverbial stick to push Americans towards healthcare coverage. The plan announced by House Republicans, on the other hand, uses a system of tax credits to entice Americans to buy health insurance in the open market. If this bill is passed by Congress, there are likely to be wide-reaching implications for Americans, particularly low-income earners.
Why is Obamacare being repealed?
Obamacare, since it was passed by the Senate in late-2009, has been the gripe of Republicans, despite its best efforts to make healthcare universal and affordable. One of the key reasons the law has attracted such intense opprobrium from the right is an ideological one. Republicans detest the redistributive premise of Obamacare: that is, Americans who can afford buying private health insurance are charged higher premiums to help pay for the subsidies received by lower-income Americans who purchase their healthcare insurance on government exchanges.
Despite many hardliners criticizing Obamacare as a welfare program masquerading as a healthcare program, the law has led to a marked decrease in the number of uninsured Americans. According to Gallup, a pollster, the number of uninsured Americans fell from 16% in 2010 to 11% in 2016. A key question of the recently proposed bill will be the impact on the newly insured, and whether they will lose insurance coverage under the new framework.
What are some of the features of the proposed bill?
The bill proposed by the House GOP eliminates the requirement for all Americans to purchase health insurance by removing the tax penalty for those that have not purchased coverage. Instead, the new legislation seeks to encourage people to maintain coverage by permitting health plans to impose a 30% surcharge on those who drop coverage and then reinstate it. The Republican plan, which represents a broad shift of power from Washington back to the states, provides tax credits to people with incomes less than $75,000. Notably, these tax credits will in many cases be lower than the subsidies currently being offered by Obamacare.
Will the new bill pass into law?
The proposed legislation must be approved by the full House and Senate before Trump can sign the bill into law. The law is not guaranteed to pass, however, as it does not appear that there is unified Republican support. Many in the far-right factions of the Republican party do not believe that the plan goes far enough, with a number of Republicans including Rand Paul criticizing an earlier draft of the bill as “Obamacare Lite”. At the same time, more moderate Republicans from states that chose to expand Medicaid have expressed their opposition to any plan that would leave millions uninsured. Reconciling these disparate groups within the Republican party will be no easy task.
What are the implications?
Perhaps the most important consideration of the new bill is its impact on individuals in lower-income brackets. In its present form, the bill will provide tax credits that start at $2,000 a year for individuals under the age of 30. For those aged 60 and over, the tax credits increase to $4,000. These credits, however, are unlikely to be sufficient to cover the premiums for comprehensive healthcare coverage, and may only provide for protection against a catastrophic health event.
It is too early to call out the precise impact of this health bill. However, one thing is for sure: the Republican plan is going to be hotly criticized by Democrats who will seek to avoid what amounts to a dismantling of Obamacare. The legislation is also unlikely to satisfy all the constituents of the Republican party, and may lack the compromise necessary to garner the support needed to pass the bill.
George Hadjia is a Research Analyst with Montgomery Global Investment Management.
To learn more about Montaka, please call +612 7202 0100.
Unveiling the Obamacare Replacement
On Monday 7 March, 2017, the House GOP unveiled its plan to repeal and replace Obamacare. Obama’s signature healthcare mandate required nearly all Americans to purchase health insurance, using the proverbial stick to push Americans towards healthcare coverage. The plan announced by House Republicans, on the other hand, uses a system of tax credits to entice Americans to buy health insurance in the open market. If this bill is passed by Congress, there are likely to be wide-reaching implications for Americans, particularly low-income earners.
Why is Obamacare being repealed?
Obamacare, since it was passed by the Senate in late-2009, has been the gripe of Republicans, despite its best efforts to make healthcare universal and affordable. One of the key reasons the law has attracted such intense opprobrium from the right is an ideological one. Republicans detest the redistributive premise of Obamacare: that is, Americans who can afford buying private health insurance are charged higher premiums to help pay for the subsidies received by lower-income Americans who purchase their healthcare insurance on government exchanges.
Despite many hardliners criticizing Obamacare as a welfare program masquerading as a healthcare program, the law has led to a marked decrease in the number of uninsured Americans. According to Gallup, a pollster, the number of uninsured Americans fell from 16% in 2010 to 11% in 2016. A key question of the recently proposed bill will be the impact on the newly insured, and whether they will lose insurance coverage under the new framework.
What are some of the features of the proposed bill?
The bill proposed by the House GOP eliminates the requirement for all Americans to purchase health insurance by removing the tax penalty for those that have not purchased coverage. Instead, the new legislation seeks to encourage people to maintain coverage by permitting health plans to impose a 30% surcharge on those who drop coverage and then reinstate it. The Republican plan, which represents a broad shift of power from Washington back to the states, provides tax credits to people with incomes less than $75,000. Notably, these tax credits will in many cases be lower than the subsidies currently being offered by Obamacare.
Will the new bill pass into law?
The proposed legislation must be approved by the full House and Senate before Trump can sign the bill into law. The law is not guaranteed to pass, however, as it does not appear that there is unified Republican support. Many in the far-right factions of the Republican party do not believe that the plan goes far enough, with a number of Republicans including Rand Paul criticizing an earlier draft of the bill as “Obamacare Lite”. At the same time, more moderate Republicans from states that chose to expand Medicaid have expressed their opposition to any plan that would leave millions uninsured. Reconciling these disparate groups within the Republican party will be no easy task.
What are the implications?
Perhaps the most important consideration of the new bill is its impact on individuals in lower-income brackets. In its present form, the bill will provide tax credits that start at $2,000 a year for individuals under the age of 30. For those aged 60 and over, the tax credits increase to $4,000. These credits, however, are unlikely to be sufficient to cover the premiums for comprehensive healthcare coverage, and may only provide for protection against a catastrophic health event.
It is too early to call out the precise impact of this health bill. However, one thing is for sure: the Republican plan is going to be hotly criticized by Democrats who will seek to avoid what amounts to a dismantling of Obamacare. The legislation is also unlikely to satisfy all the constituents of the Republican party, and may lack the compromise necessary to garner the support needed to pass the bill.
To learn more about Montaka, please call +612 7202 0100.
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