Last night, Republicans in the U.S. House released their bill to replace Obamacare. (here) Repeal and replace of the Affordable Care Act (ACA) has been a priority for Republicans since the unpopular law passed in 2010. The ACA has been a failure at reaching its goals. Obamacare has not come close to providing universal health insurance, it has not held health care costs down, and it has forced millions of people out of their existing insurance into government-controlled plans.

Now with control of both houses in Congress and the White House, Republicans have the opportunity to make good on their promise – at least partially. Complete repeal of the ACA would require at least 60 votes in the U.S. Senate. Republicans only have 52 seats. Consequently, any legislation to replace Obamacare can only be done in the current political climate through reconciliation, which deals with budget and financial considerations. Reconciliation only takes a simple majority in both houses.

The Republican bill, called The American Health Care Act, retains some features of the ACA, but more importantly repeals many of the fundamental parts of Obamacare. Here are the basics of the bill:

• Repeals the individual and employer mandate.
• Eliminates virtually all of the ACA taxes and defers the “Cadillac Tax” on high-cost health insurance plans until 2025.
• Provides a refundable tax credit based on age, not income. The credit starts at $2,000 per person for 18 year olds and gradually increases to $4,000 as people age. The maximum for a family is $14,000.
• People purchasing catastrophic health insurance plans, without the ACA benefit mandates, can receive the tax credits.
• Expands health savings account (HSA) contributions to $6,550 per year for individuals and $13,000 per year for families.
• Reforms Medicaid. States would receive per capita federal grants. States that did not expand Medicaid under the ACA would receive more federal money for disproportionate share hospitals (those hospitals that have a higher share of low-income patients) and possibly more funds because of changes in the federal match.
• States would receive federal money through a $100 billion grant over the next decade which apparently could be used for such things as high risk pools.
• Retains several ACA provisions. Children can stay on their parents’ health insurance plans until age 26. The bill addresses the pre-existing condition mandate. (There is a loop-hole for insurance companies, however. If a person does not continuously have insurance for two months, the company can charge an additional 30 percent premium surcharge.)
• Initiates tort reform. The bill sets clinical practice guidelines with input from medical organizations. It allows malpractice cases filed in state courts to be moved to federal district courts where a mandatory panel review would take place.

The bill does not make any substantial changes to the Medicare program. It does not change anything related to employer-paid health insurance, except that the bill eliminates the employer mandate.

Theoretically, by expanding HSAs and by exempting catastrophic insurance plans from the Obamacare benefit mandates, the individual health insurance market would grow. Employees may find the individual market more attractive and cheaper than employer-paid plans. Individual plans would also eliminate the onerous job-lock that forces many employees to continue in a job because of health benefits.

The American Health Care Act is a starting point for repeal and replacement of Obamacare. Health care and budget committees in both houses will review the bill and make recommendations before formal floor votes. Ideally, a final bill and vote would occur in the next few months, with roll-out of the legislation over the next few years.