Insurers both winners and losers in GOP bill

The the new Republican plan to replace the Affordable Care Act could deliver a fatal blow to the insurance exchanges, experts say.

"I think the individual market will fail. I don't see a death spiral, I see them sitting out of the market," said Kevin Fitzgerald, a partner and insurance lawyer with Foley & Lardner who works in Milwaukee.

Major insurers have been leaving the ACA marketplace over the last two years. Those remaining need to submit their premium rates for the 2018 plan year by June 21, after the Centers for Medicare and Medicaid Services gave insurers extra time from an original submission date of May 3, to sort out the ACA market uncertainty.

Fitzgerald sees the market continuing through that date, as no one really knows what the final version of the GOP bill, dubbed the American Health Care Act, is going to look like. If insurers submit rates in June, they can still pull the plug by October.

[Also: Providers to bear cost burden in Republican healthcare plan, experts say]

The bill's lack of an individual mandate to buy insurance gives younger, healthier individuals less of an incentive to get covered. It also does away with the employer mandate.

However, beneficiaries who get coverage face a 30 percent premium penalty if they let their insurance lapse.

The GOP plan offers a tax credit based on age rather than income, though there is an income cap affecting 10 percent of those getting insurance.

The idea is the tax credits are payable monthly to the insurance companies, the same way it works with Healthcare.gov.

While the ACA subsidies were only available on the exchange, under the GOP plan, the credit follows the beneficiary.

"It's possible the private market off-exchange will grow or be more of a player. If either of those markets improves, it will take away from the ACA exchange," Fitzgerald said.

[Also: Andy Slavitt: GOP healthcare bill built on 'faulty' math]

The problem, said Navigant consultant Jeff Goldsmith, is that the tax credit numbers don't work for older people.

On the GOP plan, a 59-year old gets a $3,000 credit, he said. There's not much you can buy for that, he said, since a premium for a good plan for a 59-year-old is about $10,000, he said.

The tax credit goes up to $4,000 for a 60-year-old and over, and that's nowhere close to enough, Goldsmith said.

"If the president had run on this bill, he wouldn't be president," Goldsmith said. "If someone had told those 57-year-olds their premiums would be twice as high, they would have voted for Hillary."

Without the individual mandate incentive and less financial support in the form of tax credits, getting individuals to sign up for care and pay for it once they're covered is going to be worrisome, according to Goldsmith.

Healthcare consultant Paul Keckley said insurers gain a lot more from the Republican plan to replace Obamacare than providers, who may face more uncompensated care.

"This administration is making life a little more attractive to insurers," he said.

Insurers will be able to increase the cost of premiums for an older person to a 5-1 premium cap from 3-1 under the Affordable Care Act. Payers can be a little more aggressive in pricing using actuarial figures.

"It says you're able to price products much more aggressively for seniors, much more favorably for young people," Keckley said.

[Also: Tanning salons, lottery winners tackled in GOP healthcare bill]

Of those covered in the Obamacare marketplace, over half are  Medicaid eligible, but dual-eligibles do not benefit under the GOP plan, Keckley said.

Medicaid expansion is being phased out, with the cost shifting to the states if they choose to continue the coverage.

"The tax credits are less generous for people with incomes close to the Federal poverty level, and cost-sharing reductions for deductibles and copayments previously offered under the ACA would be repealed," said Margaret A. Murray, CEO of the Association for Community Affiliated Plans. "The cost-sharing reductions alone constitute $4.9 billion per year or more that would be shifted to consumers."

On thing the Republicans kept in from the ACA is the mandate that insurers cover essential health benefits, but the details were vague.

"It's mute on preventative care," Keckley said.

Currently, no one knows what this will cost as the Congressional Budget Office has yet to score the plan.

There is still also the question of whether the conservatives in the GOP will vote for it.

"Unless they can come it with companion legislation to cut federal spending in healthcare, the right is not seeing this as satisfying the budget and spending and hot items like Planned Parenthood and tax credits," Keckley said.

Also not addressed in the plan are value -based payments, which insurers have supported.

"If cost reduction and spending controls are to be legislated, it will be through another set of mandates and reimbursement cuts for Medicare," Keckley said.

Twitter: @SusanJMorse