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Proposed ACA Replacement Moves Coverage Choices to the States

Republican lawmakers suggest more state involvement in coverage decisions as they mull over replacement ideas for the Affordable Care Act.

Lawmakers draft Patient Freedom Act to replace ACA

Source: Thinkstock

By Thomas Beaton

- Several Republican lawmakers have introduced the “Patient Freedom Act” as a proposed replacement of the Affordable Care Act, emphasizing state authority and local decision-making in the health insurance market.

Senators Bill Cassidy, MD (R-LA), Susan Collins (R-ME), Shelly Moore Capito (R-WV), and Johnny Isakson (R-GA) drafted the legislative text with the intent to eliminate several federally-guided components of the ACA, including the individual mandate for insurance coverage.

"This proposal repeals burdensome federal mandates imposed by the Affordable Care Act, such as the individual mandate, the employer mandate, the actuarial value requirements that force plans to fit into one of four categories, the age band requirements that drive up costs for young people, and the benefit mandates that often force Americans to pay for coverage they don’t need and can’t afford,” said a one-page summary accompanying the draft legislation.

The Patient Freedom Act intends to keep certain parts of the ACA, including prohibitions on pre-existing condition exclusions, annual and lifetime limits, and consumer discrimination. The Act would also preserve guaranteed issue and renewability of insurance and allow young adults up to the age of 26 stay on their parent's insurance.  Coverage for mental health and substance abuse disorders would still be preserved under the Patient Freedom Act.

The bill includes three different options for how states could establish their healthcare coverage infrastructure.

Option 1: Re-implement the ACA

Under the Patient Freedom Act, states would be allowed to reinstate Title I of the ACA. States could continue to receive federal tax credits for premiums, cost-sharing subsidies, and Medicaid dollars.  States that choose to implement the ACA, however, would not be able to receive subsidy amounts more than offered in Option 2.

Option 2: State-Alternative Plan with Federal Assistance

This option would allow states to enact the Patient Freedom Act's new market-based system, called a state-alternative plan, if the state sees it as an improvement over the ACA.

The new system would provide financial assistance to legal residents of the US who don't receive health insurance through their employer or through public insurance programs like Medicare and Medicaid. The state alternative would allow states to auto-enroll uninsured individuals in basic health care coverage unless that individual opts out.

The minimum plan for eligible patients would consist of a Roth Health Savings Account (HSA), a high deductible plan, and a basic pharmacy plan. Consumers could also purchase coverage with more benefits based on their needs.

The Patient Freedom Act would also establish protections for people who require emergency care through limits on out-of-network surcharges for emergency services paid with an HSA.  Providers would be required to publish "cash prices" for services paid with an HSA or cash. This is intended to improve provider price transparency and maintain access to emergency services without excessive charges.

HSAs could be used tax-free to pay for medical care not otherwise paid by insurance for premiums as well as out-of-pocket expenses, long-term care insurance, and direct primary care.

State alternative plans would be funded with the same dollar amount as plans operated under the ACA, but only at 95 percent of the ACA rate. The state also would receive money that would have otherwise paid for Medicaid expansion within that state.

Under the alternative plan, states could establish a method for depositing funds for each person directly into their HSA, meaning that health care dollars would go directly to the patient.

Option 3: States can design an alternative solution without federal funding

If states choose to either opt out of the ACA or the state alternative, they can build healthcare coverage infrastructure that meets the needs of their population without federal funding. This includes designing and regulating insurance markets tailored to a state-level need.

Other senators have joined in supporting the Patient Freedom Act in an effort to move federal power away from the healthcare environment, noted a press release from Cassidy’s desk.

“This legislation transfers power from Washington back to patients and the states,” said Senator Lindsey Graham (R-SC) Graham. “It ensures those with preexisting conditions can get coverage. It empowers patients by making enrollment easy, encourages price transparency, and eliminates burdensome mandates.

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