If Paul Ryan thought he could get the insurance companies on board with his Trumpcare plan with a big bribe in the form of a tax cut, he thought wrong. The $400 million tax break for health insurance companies and their executives epitomizes just how much this bill is about tax cuts for the wealthy and not about health insurance. Companies couldn't deduct the value of their executive compensation from their corporate taxes above $500,000 under Obamacare, and Ryancare lifts that cap, meaning executives (not just CEOs, but all executives) can be paid even more and their companies pay even less in taxes. Even with that huge bribe, they have not won over the big player in the industry because the key features of the bill won't work.
The head of the largest insurance lobbying group urged House Republicans Wednesday to rethink several central features of their new ACA repeal bill, including age-based tax credits and proposed changes to Medicaid funding.
Marilyn Tavenner, CEO of America's Health Insurance Plans, said in a letter to House leaders that the bill should be revised to offer premium tax credits that factor in both the age and income of a health plan member. She wrote that there should be larger subsidies for individuals with incomes between 100% and 400% of the federal poverty level.
“Tax credits related to age as well as income will help ensure that more people stay covered, and are the most efficient and effective way to allocate tax-payer dollars,” she wrote. […]
Tavenner said her association is “concerned” that changes in Medicaid's financing structure could “result in unnecessary disruptions in the coverage and care beneficiaries depend on.” She added that insufficient funding could jeopardize the progress made on providing coverage for and access to behavioral health services and opioid addiction treatment. Some of AHIP's members do big business as Medicaid managed care contractors.
The flat tax credit in the bill pegged to age rather than income—allowing insurers to charge as much as 5 times more for people over age 50—and not taking into account the fact that premium costs can vary greatly by geography—healthcare costs are much higher in some states and local markets than in others and premium costs reflect that. This fantastic interactive map from the Kaiser Family Foundation shows that.
The bottom line for insurers is that they lose paying customers they got under Obamacare, but at the same time they have to operate under the provisions of the law that mean they can't discriminate against customers with pre-existing conditions and they have to keep covering essential health benefits. The substitute Ryan came up with for the individual mandate—a 30 percent surcharge levied by insurance companies for people who've let their insurance lapse for two or more months—actually is a nightmare for insurance companies. There's a disincentive for healthy uninsured people to sign up if they have to pay that extra, so they'll wait until they’re sick to get insurance, and then cost a lot more.
Tavenner warned that the uncertainty insurance companies are already struggling with is going to get worse, and that immediately eliminating the individual mandate penalties, as the House bill would do, would add to the instability of the individual insurance market in the short term." Clearly, AHIP wasn't consulted in the writing of this, no stakeholders in the industry were. That's why basically every provider association is opposing it.