ACA Watch March 7, 2017
Committees with jurisdiction over health care have released the American Health Care Act through a budget process called reconciliation. On March 6, 2017 the House Ways and Means Committee and the Energy and Commerce Committee released separate legislation that intends to repeal and replace the Affordable Care Act (ACA). This marks a concrete step forward after months of uncertainty as Republicans in Congress searched for an agreement.
The budget reconciliation process allows Republicans to repeal only parts of the ACA that affect federal spending. Were they to use a traditional legislative path, the 52 Senate seats held by Republicans would not fulfill the 60 seats necessary to overcome a filibuster.
According to a fact sheet summarizing the two plans, “House Republicans are moving forward with fiscally responsible legislation to deliver relief from Obamacare’s taxes and mandates that lay the groundwork for a 21st century health care system.”
What Happens Next?
Republican party leaders say they hope to progress the bill forward to be signed by President Trump next month.
Both Committees have scheduled markup sessions of the legislation on Wednesday, March 8, at 10:30am. The Congressional Budget Office has not provided an analysis of how much the legislation would cost, as well as how many people it would serve. The House Committees plan to vote on the bill without a cost analysis, and send it through the House of Representatives before their scheduled spring break on April 7. (New York Times – subscription required).
According to the New York Times, the outlook in the Senate may be less clear, as many Republicans have differed with their party on the issue of how to repeal and replace the ACA. Rob Portman (R-OH), Shelley Moore Capito (R-WV), Cory Gardner (R-CO), and Lisa Murkowski (R-AK) signed a letter on Monday, stating that a House draft of the legislation did not adequately protect people in states like theirs. Previously, other Republican Senators Mike Lee (R-UT), Rand Paul (R-KY) and Ted Cruz (R-TX) expressed concerns with Republican legislation on the table.
Many of the proposed changes would take place on or after January 1, 2018.
The new plans propose a dramatic shift for Medicaid, capping federal funding for the first time. Historically, since 1965, federal and state funding for the Medicaid entitlement was guaranteed regardless of enrollment and cost (Kaiser). This strategy for Medicaid reform is sometimes referred to as “Block Grants”, as referenced in a previous ACA Watch.
The ACA expanded Medicaid funding and widened Medicaid eligibility for those at-risk. Per the new bills, extra funding would end in 2020. For each state, with a fixed allotment of federal funds would be provided for each of the 70 million people on Medicaid, and would pay different amounts for children, older Americans, and people with disabilities. (New York Times – subscription required). The legislation would let individuals already enrolled in the expansion program under the ACA to remain enrolled. Maintaining ACA Medicaid expansion has been a hot-button issue for many Republican legislators whose states have benefitted from the expansion. The new legislation seems to be a compromise among Republicans addressing this tenuous situation.
The plan delays the effective date of the Cadillac Tax until the year 2025. Unpopular among employers, the Cadillac Tax would impose a 40% excise tax on employer-sponsored health coverage above a certain cost.
The ACA’s Health Insurance Tax and Medical Device Tax, both already suspended until 2018, would be repealed completely.
The plan would eliminate the individual and employer mandate (“Play or Pay”) This means no penalties for individuals who go without health coverage, as well as the requirement for certain larger employers to provide health coverage. The plan will essentially continue providing tax credits encouraging individuals to purchase coverage, configuring the credits in a very different way from current ACA law.
Penalties for both the Individual Shared Responsibility and Employer Shared Responsibility mandates would be eliminated retroactively to January 1, 2016.
The legislation would allow insurers to charge older people up to five times more for coverage than younger people. Law currently permits a 3-to-1 ratio. This change could result in double-digit premium increases for older people. The baby-boomer generation is not pleased.
Premiums for younger individuals would decrease, but by smaller amounts. (Kaiser)
HSAs and FSAs
Health Savings Accounts (HSA) would have higher limits. The increased excise tax on non-eligible HSA purchases would be repealed.
The Health Care Flexible Spending Account (FSA) annual limits would be repealed with the new plan, as of January 1, 2018. The prescription requirement for purchasing over-the-counter items using FSA funds would also be repealed as of 2018.
The plan would repeal the ACA’s advanced premium tax credits for those not eligible for Medicaid.
Assistance for Low and Middle-income Individuals
The plan calls for the creation of a Patient and State Stability Fund, which helps insurance carriers that offer coverage in the exchange who enroll low-income and high-risk individuals. The Fund is similar to the ACA’s cost-sharing reductions, which would be repealed by the plan.
A premium tax credit would be created for low-income individuals below 300% of the Federal Poverty Level, adjusting for household income. Individuals who do not receive insurance through an employer or the government would receive a monthly tax credit, of $2,000-$14,000 per year.
What Would Remain from ACA?
- The American Health Care Act would prohibit health insurers from denying coverage or charging higher rates based on pre-existing conditions, very similar to current ACA law (Kaiser Health News).
- The plan would preserve the current tax treatment of employer-sponsored health care.
- It also would allow dependents to continue on their parents’ health plan until age 26, a very similar and popular feature of current ACA law.
As a long-time member of the Employers Council for Flexible Compensation (ECFC), Employee Benefits Corporation will continue to provide ACA Watch updates as legislation continues to evolve.
This week we will be in Washington DC attending the ECFC Annual Conference, which will include Capitol Hill visits on Thursday. We will continue to update you as the legislation evolves through the mark up process.