When the House released its 1,990 health care bill, Rep. Mike Pence (R-IN) criticized the legislation for including “the mandatory world ‘shall’ in the bill 3,425 times.” Today, the Hill obtained the Republicans’ 230 page alternative, which the House leadership plans to offer as an amendment during floor debate.

The bill includes the word ‘shall’ 378 times, but does very little to expand access or lower health care costs. In fact, while the House bill incorporated numerous Republican ideas and provisions, the Republican legislation is a message amendment that translates Republican rhetoric against the Democratic proposal into legislative language. “The purpose of this Act is to take meaningful steps to lower health care costs and increase access to health insurance coverage,” the bill states, “without (1) raising taxes; (2) cutting Medicare benefits for seniors; (3) adding to the national deficit; (4) intervening in the doctor-patient relationship; or (5) instituting a government takeover of health care.”

Below is a summary of the Republican plan. In short, the amendment shifts the costs and risks of insurance onto individuals and divides the market into low-cost plans for the healthy and high-cost insurance for the sick:

Access to coverage:

- Establishes high risk pools for sicker individuals: State are required to establish high risk pools for Americans who cannot purchase insurance in the individual market due to pre-existing conditions, but nothing in the legislation prohibits the state pools from excluding coverage for the very condition that makes an individual eligible in the first place (as they do today.) The bill abolishes waiting lists and specifies that the pools must provide at least two coverage options, one of which must be a high deductible plan with HSA. Premiums can be set at no higher than 150% of (state) average. The federal government will provide $15 billion in funding.

- Healthier Americans can purchase coverage on the individual market: For Americans moving from group to individual coverage, the legislation eliminates the HIPAA requirement of having creditable coverage in the past 18 months to receive individual insurance market insurance. Annual or life time spending caps are also eliminated. However, the bill will allow insures to deny coverage for pre-existing conditions and charge very different rates based on gender and age.

- Health insurers can sell policies across state lines: The insurer only has to follow the rules of the state it declares to be its “primary” state, not of secondary states in which it can also sell policies. As a result, all policies will have a ‘buyer beware’ label warning consumers that the plan is “not subject to all of the consumer protection laws or restrictions on rate changes of the state.”

- Businesses can form association health care plans: The legislation creates rules for governing association health plans, which will allow small businesses to come together, by industry or trade, and form health plan through which they can purchase coverage for their employees. Association health care plans have sole discretion in selecting specific items and services that can be included as benefits (i.e. no minimum guaranteed benefit package, or minimum costs etc). The plans are to be operated by Board of Trustees who appoint the actuary to determine financial status and viability.

- Young adults can stay on their parents’ coverage: Dependent adults can stay on their parents’ plan until they are at least 25, although the language would allow a plan to increase that age.

Lowering health care costs:

- Offers bonuses for states that lower premiums, number of uninsured: Establishes state innovation program grants to reward states for lowering the cost of their premiums. Includes bonus for reducing the number of uninsured.

- Establishes a plan finder website: States contract with private entities to create a health “plan finder” website which do not directly enroll individuals in insurance plans.

- Malpractice reform: Specifies that claims must be filed within three years, and caps non-economic damages at $250,000.

Miscellaneous:

- Enhances Health Savings Accounts: Enrollees can build their credit by contributing to their HSA and can use HSAs to pay for high deductible plan premiums. The bill extends the definition of a qualified medical expense.

- Employer wellness programs: Allows group and individual health plans to vary premiums and cost-sharing by up to 50% of value of benefits based on participation or lack of participation in a standards-based wellness program.

- Federal dollars can’t touch plans that offer abortion coverage: The bill does not allow federal funds to go to any insurance plan that offers abortion coverage. This means that a woman who wants to purchase a comprehensive health insurance plan would have to pay for the entire cost of the policy, even if she qualifies for subsidies and uses private premiums to pay for her abortion.

The new Republican health care plan expands “coverage” and “choice” by permitting health insurers to sell policies across state lines. Under the Republican proposal, the insurer can choose a ‘primary state’ “whose covered laws shall govern the health insurance issuer” and can change states “upon renewal of the policy.”

Page 129 requires a “health insurance issuer” to “provide the following notice” informing consumers in so-called ‘secondary states’ that the policy is “not subject to all of the consumer protection laws or restrictions on rate changes of the state.”

Here is the notice, as it is described in the legislation:

The GOP is conceding the progressive argument. It is admitting that insurance companies would have little incentive to continue doing business under certain state rules which “require that companies issue coverage to all new customers and not set higher rates for people who are already sick.” Instead, companies could chose a state with scarce regulations and sell policies that don’t provide mental health parity, cancer screenings, or abide by regulations that limit the rates that can be charged to higher-cost consumers. This way, plans can attract the healthiest applicants and detract the sick.

After an insurer issues a policy to an individual, the GOP bill does prohibit the issuer from increasing the premiums assessed on the individual “based on a health status-related factor or change of a health status-related factor or the past or prospective claim experience of the insured individual.” However, the bill goes on to say that “Nothing in paragraph (1) shall be construed to prohibit a health insurance issuer from terminating or discontinuing coverage” or “from raising premium rates for all policy holders within a class based on claims experience.”

The Republican leadership in the House has sent a health care bill to the Congressional Budget Office and the early details don’t look good:

- Insurers could circumvent state-based consumer protections by selling policies across state lines

- Health care costs could be reduced by less than 1/2 of one percentage point through malpractice reform

- Businesses with younger and healthy employees could band together and join association health care plans, while firms with older workforces wouldn’t have access to affordable coverage

- Individuals with chronic illnesses or pre-existing conditions could join very expensive and inefficient high risk pools

The Republican plan doesn’t “end insurance industry practices that discriminate against high-risk individuals or provide tax credits to help the uninsured purchase coverage.” It is designed for the healthy while they’re healthy.

Rather than driving down costs by expanding access, Republicans are hoping to expand access by driving down costs. “Our substitute aims at driving down costs,” House Minority Leader John Boehner (R-OH) told reporters Monday. “If you drive down costs, you can expand access.” But press reports suggest that this proposal doesn’t include any of the things we know can reduce costs over time — creating incentives for better coordination of care (accountable care organizations, medical homes, reducing unnecessary readmissions, etc), investments in prevention and comparative effectiveness research, other system modernizations.

The Republican legislation even undermines the existing consensus surrounding cost control. In May, a group of doctors, hospitals, drug makers and insurance companies came together to present President Obama with a letter promising to reduce the growth rate in annual health spending by 1.5 percentage points a year over the next 10 years — lowering spending overall health care spending by $2 trillion (this represents a 20 percent reduction in projected growth) — in the context of comprehensive health care reform. The hospitals promised to contribute “some $155 billion in Medicare and Medicaid savings over the 10 years” if more patients enter the hospital system as a result of health care reform. The insurance industry has said they would adopt cost containment strategies and accept anyone who applies for coverage if everyone entered the risk people. But the Republican plan doesn’t invest in comprehensive reform that opens up the system to more people and begins to control skyrocketing health care costs. It only marginally lowers the costs of insurance for the healthy — while they’re healthy:

- Allowing insurers to sell policies across state lines: Allowing insurers to sell policies across state lines would allow companies to avoid state consumer-protection laws and solvency requirements. Insurance companies “would have little incentive to continue doing business” under certain state rules which “require that companies issue coverage to all new customers and not set higher rates for people who are already sick.” Companies will charter in states with scarce regulations, and will no longer have to provide mental health parity, cancer screenings, or abide by regulations that “limit the rates that can be charged to higher-cost consumers and that limit who can be excluded for a health plan.

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