Eric Thayer / Reuters U.S. House Majority Leader Kevin McCarthy, U.S. House Speaker Paul Ryan, and U.S. Representative Greg Walden hold a news conference on the American Health Care Act on Capitol Hill in Washington, D.C., March 7, 2017.

The Republican Health Plan

A Poor Replacement for the Affordable Care Act

On March 6, House Republicans introduced the American Health Care Act to partially repeal and replace the Affordable Care Act, also known as Obamacare. The new legislation raises four questions: What are its elements, will it pass, what would its effects be if it did, and what does it leave out?

It might be hard to tell from all the heated rhetoric, but the AHCA follows many of the basic building blocks of the ACA, albeit imperfectly, in providing insurance. Both impose community rating on private insurance companies, a provision that requires offering the same premiums within a region for both healthy and unhealthy individuals. They both encourage people to buy insurance when they are well, rather than waiting until they are sick, to minimize the gaming of the system. And given the costs involved, both plans provide subsidies to help low- and moderate-income households afford the coverage. They also both limit the degree to which insurance companies can charge older people (who tend on average to have higher costs) more than younger people.

Despite these similar building blocks, however, the new plan differs substantially in its implementation from the one it is intended to replace. For example, instead of a mandate for healthy people to buy insurance, the AHCA would impose a 30 percent penalty if a healthy individual doesn’t purchase insurance and then subsequently gets sick and wants it. The new legislation’s subsidies would be substantially less generous for low- and moderate-income workers, and unlike today, they would be set nationally and wouldn’t vary with the local cost of health care. And although the ACA limits the ratio of older to younger people’s premiums to three to one, the new bill allows for a ratio of five to one. There are also important differences in Medicaid, the program for low-income Americans and those with disabilities, in that the AHCA would impose limits on the federal government’s financing of the program and shift an estimated $370 billion in

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