Legislative Update: AHCA edition

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In this edition of Legislative Update, Marilyn Singleton, MD, JD dissects AHCA. We know what’s in the House version, but what will the Senate come up with?

The American Health Care Act, H.R. 1628—passed by the House with one vote to spare on May 4—is a budget reconciliation bill that is part of the 2017 federal budget process. It lowers both government spending and tax revenue. Reconciliation status means it can avoid filibuster in the Senate and pass with a simple majority of votes.

Please be advised: the Senate has promised to change this bill and is already looking to side-step major provisions of AHCA, claiming they might not meet requirements for reconciliation. “What we have to do is build a consensus … to get to a compromise we can agree to,” stated Senate Majority Whip John Cornyn, a member of a 12-person Senate “working group” said to be developing an alternate bill.

Some argue that the bill was put together too quickly without conferring with stakeholders while Obamacare was drafted and discussed for over a year. Of course, I don’t recall the Obama administration contacting AAPS for our opinion.

It seems to me, the Republicans have had a solid 6 years to horse-trade and come up with something that should have been ready on day one for a vote.

There were not enough votes to pass the bill at the end of March. The centrist Tuesday Group and the Freedom Caucus kissed and made up with the MacArthur Amendment and the Upton Amendment at the end of April. The MacArthur amendment allows states to apply for a waiver allowing insurers to further increase the ratio of premiums charged to enrollees in their 50s and early 60s versus younger enrollees. It also allows states to waive essential health benefits and certain sections of the community rating program that would permit insurers to charge people significantly more if they have a pre-existing condition, as long as the state creates a program to ameliorate the costs to enrollees and/or insurers. The Upton Amendment adds an additional $8 billion in assistance to lower costs for enrollees with pre-existing conditions.

The bill has equal opportunity opposition: AARP, AMA, American Hospital Association, Association of American Medical Colleges, among others. Additional critics include Heritage Action, the Cato Institute, Americans for Prosperity, FreedomWorks, Tea Party Patriots, MoveOn.org, and the Center for American Progress and many other liberal groups.

What Was “Repealed”

  • The AHCA eliminates (by reducing to $0) the individual mandate penalty for not having ACA-qualified “coverage.”
  • The AHCA reverses the ACA’s Medicaid expansion in 2020 (32 states opted in). Anyone enrolled prior to 2020 would stay enrolled.
  • The AHCA eliminates the ACA’s expanded required benefits mental health and addiction benefits under Medicaid.
  • The AHCA eliminates fines for large employers who don’t provide health plans
  • Under current law, state Medicaid programs are guaranteed federal matching funds for qualifying expenditures. The bill establishes targeted spending caps for each state, on federal funding for state Medicaid programs beginning in 2020 based on 2016 Medicaid expenditures. States could also choose a block grant and institute work requirements for Medicaid enrollees.
  • Small business tax credits end in 2020.
  • Health insurance premium limits are adjusted. Under the ACA, older persons could be changed up to three times that of younger folks. This is changed to to five times.
  • The platinum, silver and bronze levels are eliminated.
  • Taxes are eliminated: 3.8% tax on investment income and 0.9% additional Medicare tax on high income folks. Also, the 10% tanning services and 2.3% medical device tax.
  • The 40% Cadillac tax is suspended until 2024.
  • The threshold for receiving a tax deduction form medical expenses is returned to 7.5% of adjusted gross income from the ACA’s 10%.

Added by last minute amendment:

  • States may opt-out of providing the ACA’s essential health benefits. (This requirement was already dropped in the bill for Medicaid but not for the individual market.)
  • Pre-existing conditions: States may opt-out of requiring premiums to be the same for all people of the same age, so while individuals with pre-existing conditions must be offered health insurance there is no limit on the cost of that insurance. New funds would help lower premiums for these individuals.
  • States may opt-out of limiting premium differences based on age. The 3 to 1 limit is changed to 5:1 federally. States may apply for a waiver to choose a different ratio above 5:1.

Keepers

  • Guaranteed issue
  • The AHCA would keep the ACA’s requirement that dependents can stay on their parents’ plan until they are 26.
  • The ACA’s federal and state-run exchanges which listed individual and small business health insurance plans, would continue unchanged.
  • The AHCA would continue to provide subsidies for premiums that are based on income although the formula would be completely different and the subsidy would likely be much less for young, low-income Americans.
  • Although the individual mandate is reduced to $0 (essentially repealing it), the AHCA would instead impose a 30% surcharge when purchasing a policy after a lapse in coverage.

Expanded Benefits

  • Increased contributions to Health Savings Accounts. Increase annual tax free contribution limit to equal the limit on out-of-pocket cost sharing under qualified high deductible health plans ($6,550 for self only coverage, $13,100 for family coverage in 2017, indexed for inflation). – Tax penalty for HSA withdrawals used for non-qualified expenses is reduced from 20% to 10%.
  • Federal subsidies can assist with premiums for insurance purchased off the exchanges (but not grandfathered plans).
  • $123 Billion authorized for various state-based initiatives to “to improve affordability and access to coverage.”

Additional resources:

Full text bill (126 pages) and amendments: https://rules.house.gov/bill/115/hr-1628

Congressional Research Service Summary: https://www.govtrack.us/congress/bills/115/hr1628/summary#libraryofcongress

Kaiser Family Foundation Summary: http://files.kff.org/attachment/Proposals-to-Replace-the-Affordable-Care-Act-Summary-of-the-American-Health-Care-Act

CBO Scoring: https://www.cbo.gov/publication/52486

AAPS White Paper on Repeal and Replace: http://aapsonline.org/white-paper-repealreplacement-affordable-care-act/

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