Here's Who Will Benefit Most From the GOP Replacement Plan for Obamacare

Act strips ACA's employer mandate making it easier to hire employees and drive down costs

Paul Ryan, House Leaders Hold Press Conference On American Health Care Act
Speaker of the House Paul Ryan holds up a copy of the American Health Care Act during a news conference / Getty Images
March 8, 2017

The American Health Care Act, the Republican replacement to the Affordable Care Act, eliminates mandates and taxes, thereby benefiting young individuals, businesses, and healthy enrollees.

The act has come under criticism from both Democrats and Republican members of the Freedom Caucus, who either say that the legislation will leave many uninsured or does not go far enough to repeal Obamacare.

However, according to Diana Furchtgott-Roth, a senior fellow at the Manhattan Institute, the act does improve the status quo by creating a more consumer-driven system that will lower costs for everyone, especially for young individuals, businesses, and healthy enrollees.

First, the American Health Care Act eliminates Obamacare's employer mandate, making it less expensive to hire workers. Furchtgott-Roth, author of the book Disinherited: How Washington Is Betraying America's Young, says this will benefit young people the most since they are new entrants into the workplace.

"There's two ways that Obamacare, the mandate, hurt employment," Furchgott-Roth says. "First of all, there was a cost, a penalty of $2,000 per worker if you didn't provide the right kind of health insurance. Second, you didn't get the penalty if you employed fewer than 50 workers, so there was a big incentive not to grow above 50."

Under Obamacare, she says, older Americans could not be charged more than three times as much as younger Americans for health insurance premiums. The Republican alternative raises this ratio to 5-to-1 and gives states the flexibility to adjust it if they need to. Obamacare's 3-to-1 ratio drove up prices for young people and is one of the reasons young people failed to enroll in health care plans, she says.

According to Furchtgott-Roth, not only will the Republican plan make it easier for young people to get jobs, but they will also pay less for their health care.

The second group that the American Health Care Act helps is businesses because the new plan will not mandate them to provide health insurance, and in turn, companies can provide the kind of insurance they think their employees need.

Obamacare required that health insurance plans offered by businesses include certain types of care even if the individual did not want or need it. For example, plans had to include maternity care even if the employee was not planning on having a baby, it had to offer pediatric care even if the employee did not have a child, it had to include drug-abuse coverage even if the employee did not take drugs, and it had to offer mental-health coverage even if the employee did not want it.

"When the Affordable Care Act first was implemented, companies had to receive waivers for their plans, they were temporarily grandfathered in because they did not meet the requirements of Obamacare," Furchtgott-Roth says.

"You can't just buy a simple plan that would cover you just getting cancer or falling off your bike in traffic," says Furchtgott-Roth. "That will be allowed under the new bill, so the cost of plans should go down, the cost of health care should go down, the cost of young people's premiums should go down, and it'll be easier to get employed."

Furchtgott-Roth also points out that when an employer provides health insurance, they are really paying you lower wages than you would receive otherwise. If employers are not forced to provide health care coverage, they can either decide to offer a more expensive plan, a simpler plan, or pay employees higher wages and offer no plan at all.

The third group that benefits from the Republican replacement is healthy individuals since they would be able to purchase a catastrophic health care insurance plan.

"That means you can use the health savings account and the flexible savings account to pay for health insurance policies out of pre-tax income," explains Furchtgott-Roth. "Say you're really healthy and you go for a check up or maybe you get a cold and you want to go to CVS for a strep test, you'll be able to pay for that out of a health savings account and just have a low deductible policy that covers something really serious like if you get cancer."

Finally, Furchtgott-Roth says that everyone would benefit from the American Health Care Act due to a decline in the cost of medical care from the expansion of health savings accounts and flexible savings accounts.

"When people pay out of their own pocket shopping around, they pay for routine care, the price falls," she says. "We've seen that with Lasik eye surgery and cosmetic surgery."

"The prices of those have been falling because people observe what the costs are, so any incentive there is to put money in health savings accounts and pay out of that will reduce the cost of health care," she says. "Besides that, there would be more competition with insurance companies being able to offer catastrophic health care again, they'd be able to offer simple plans not like the large plan that the Affordable Care Act mandates."

Furchtgott-Roth also refutes the claim that tax credits under the Republican plan are less generous than the ones offered currently under Obamacare.

"The big advantage of this tax credit is you can take it and buy any plan that you want, that's the huge advantage," she says. "So premium subsidy for Obamacare had to be used on the exchange, it had to be used for one of these very expensive Obamacare plans so there was no competition—these companies were basically dropping out."

According to Furchtgott-Roth, the increased competition the American Health Care Act provides will drive costs down, which will mean the consumer's dollars will go further.

Published under: Obamacare