EXPLAINER: American Health Care Act

Republicans unveiled their 123-page alternative to President Obama’s Affordable Care Act, commonly called Obamacare. The GOP plan is called the “American Health Care Act.”

While the Republican bill defers from Obamacare in key areas—including Medicaid— it still provides its own versions of carrots and sticks: tax subsidies to make plans more affordable, penalties for those avoiding insurance.


Obamacare requires Americans to have health insurance, or pay a tax penalty. The new plan eliminates that penalty, but would replace it with a different kind of stick. Anyone who would choose to go without insurance for longer than 63 days, and later resume coverage, would pay a 30 percent surcharge on their normal insurance premiums for a year.

“This penalty is somewhat different. You pay it only if you want to get back into the pool after being out of it,” Roger Feldman, a healthcare expert at the University of Minnesota, told Fox 9.


Like Obamacare, the Republican plan would subsidize health insurance. However, Obamacare provides tax credits based on income. The GOP plan would provide credits based on age, and reduce the credits the more a person makes over $75,000.

“Everyone will get the full age-based subsidy up until $75,000 if one, $150,000 if you’re a family. After that, for every dollar you increase your income, your subsidy will be cut back by 10 cents,” Feldman said.


The GOP proposal would make major changes to Medicaid, responsible for funding the health insurance of millions. The plan would freeze Medicaid expansion in 2020, and change how Medicaid is funded.

Currently, the federal government provides states with enough funds to pay the bills for Medicaid. Under the new plan, Feldman said states would “get a fixed allotment and the states would have more ability to manage that as they want.”


Under the GOP plan, the so-called “Cadillac tax” continues to be kicked down the road, at least until 2020. The 40 percent tax would apply to expensive employer health plans.

“When my employer buys my health insurance policy, it can do so with pre-tax dollars. If it gave me wages, I would have to pay 40 percent of that in income tax. What’s the incentive? Clearly, it’s to buy generous health insurance coverage, stuff I may not really need and I may not buy if I had to spend my own money,” Feldman said.

Feldman believes high-end health plans should be taxed now. Feldman opposes the current tax policy because “it’s regressive, it favors mostly wealthy people. It’s also bad because it’s inefficient. It leads us to buy insurance we don’t really need.”


The new plan still requires insurers to cover pre-existing conditions, and allows children to stay on their parents’ plans until the age of 26.


The bill is silent on whether consumers will be able to buy insurance from other states. The Republicans drafted the bill to only focus on funding and taxing, so it would need 50 votes in the Senate. Any regulatory changes, like opening markets, would have to come in a separate bill.

Democrats remain united against the bill, and some Republicans say they oppose it for not completely repealing Obamacare.

“Of the two places where I think we’re seeing similarities to Obamacare, that is the tax credits and the penalty,” Feldman said. “I would make a prediction that those are gonna stay. And we’re going to see more discussion around Medicaid.”