- On May 5, 2017
Yesterday the United States House of Representatives passed the American Health Care Act (AHCA) by a vote of 217-213. This measure, which would make significant changes to the Patient Protection and Affordable Care Act (ACA) and the federal Medicaid program, now moves to the United States Senate for consideration.
In terms of time frame, there will be no quick final decisions or actions on the AHCA. The Senate, as part of its rules, must have the full “score” of the legislation from the Congressional Budget Office (CBO) before it can start working on the AHCA. The “score” is an estimate of how much the measure will cost the federal government over the next ten years. Since this legislation includes tax credits for the purchase of private health insurance while reducing Medicaid spending, the “score” will also estimate how many Americans will gain or lose health insurance under the AHCA. The CBO will release its analysis of the House-passed version of the AHCA next week. Any changes the Senate makes to the legislation will need to be analyzed before they can be approved, since the Senate rules mandate that reconciliation bills be budget-neutral.
In terms of the content of the ACHA, the scope of the measure is almost certain to change. Senate budget reconciliation rules allows for the consideration of unlimited amendments as long as they are directly relevant to federal revenues. The leadership of the Senate has promised a lengthy and open floor debate of the AHCA and has already indicated this process will take weeks.
Right now, some of the major provisions of the AHCA include:
- The immediate reduction of the individual mandate penalty to $0.
- The immediate reduction of penalties to employers who do not offer minimum essential coverage or affordable and/or minimum value coverage to $0 (however, other employer requirements, like the requirement to offer coverage to employees who work 30 hours or more, and employer reporting requirements remain).
- A stipulation that insurers could impose up to a 30 percent premium surcharge on people who did not maintain continuous coverage.
- A phase out of most new taxes imposed by the ACA, but the “Cadillac Tax”, an excise tax on high-cost employer plans would remain with a delayed implementation date of 2026 and the PCORI fee would remain.
- The existing ACA health premium tax credits now available to lower-income individual market purchasers through the exchanges would be phased out over the next two years. They would be replaced with a new individual market tax credit program available to all individual market purchasers and people buying unsubsidized COBRA coverage based on age.
- The ACA’s changes to health savings accounts and flexible spending arrangements would be eliminated.
- States could increase the age-rating limits for individual and small group health insurance plans from a current ratio of 3:1 to 5:1 or possibly higher with HHS approval. (Prior to the passage of the ACA, 42 states allowed for greater variation in age rating than the current 3:1 limits).
- States could seek waivers from the application of certain ACA requirements, including the ten essential health benefits standard and the rules that prohibit the use of health-status underwriting in determining individual and small group market plan premiums. A state would be required to develop an alternative risk-sharing mechanism, like a high-risk pool or reinsurance program to help people with serious medical conditions before they could apply for a waiver to the rules that prohibit charging individual and small group consumers more for coverage based on their health status and preexisting conditions.
- A $138 billion fund for states was established over 10 years that could be used for various specified purposes like stabilizing individual and small group markets, creating and funding a high risk pool, subsidizing high-cost individuals and paying for mental health and substance abuse treatment expenses.
- The structure and financing of the federal Medicaid program would be changed significantly.
Importantly, through our aggressive lobbying efforts, Kistler Tiffany Benefits helped ensure that the proposed cap on the employer tax exclusion (e.g. the proposed limit to cap the deductibility of employer-sponsored health insurance) included in a leaked draft of the AHCA was excluded in the final House bill. As such, the AHCA as drafted would not impact the deductibility of employer-sponsored health insurance.
As legislative and regulatory changes evolve, Kistler Tiffany Benefits will be here to keep you informed about what may lie ahead for group health insurance plans and other employee benefit offerings. If you have any questions about the pending legislation or other legislative or regulatory matters, please do not hesitate to contact your Kistler Tiffany Benefits Consultant.
By Jessica Waltman, Special Contributor
Jessica Waltman is a health reform strategist, with more than 20 years of experience in health insurance markets and health policy. She is the former Senior Vice President, Government Affairs, for the National Association of Health Underwriters.