ACA News & Publications

ACA Pathways: ACA Replacement Bill Passed by U.S. House of Representatives; Advances to the Senate

May 05, 2017

On Thursday, May 4th, after seven years of debate, and weeks of scrambling to secure the votes needed for passage, the U.S. House of Representatives finally passed its latest version of the American Health Care Act of 2017 (AHCA), the signature legislation to repeal and replace the Affordable Care Act (ACA). The vote was very close, 217 to 213, and along party lines, with no Democrats voting for the bill.

Macarthur And Upton Amendments To American Health Care Act

Several changes have since been made to the original version of the American Health Care Act (see our ACA Pathways dated March 9th) to win over both conservative and moderate Republicans, both groups skeptical about the legislation for different reasons. These include an agreement to get the conservative Freedom Caucus on board, submitted by Representative MacArthur (R-NJ) ("MacArthur Amendment") and another agreement negotiated by Representative Upton (R-MI) ("Upton Amendment") to get the buy-in of moderate members of the House by addressing concerns that the changes by the MacArthur Amendment would remove necessary protections for those with pre-existing conditions.

These changes include:

  • Essential Health Benefits. The ACA required a minimum basic set of benefits be provided under all insurance products. Under the American Health Care Act, as amended, states will have the ability to waive these rules and establish their own standards, beginning in 2020.
  • Pre-existing health conditions. Under the ACA, health insurers are prohibited from charging higher rates based on health status, so those with pre-existing health conditions are not prevented from obtaining coverage at a higher rate, or coverage altogether. Under the American Health Care Act, states would be allowed to apply for a waiver from this requirement and permit insurers to charge higher prices to sick customers who had experienced a lapse in coverage of more than 63 days, provided that the state also set up a program to help high-risk patients obtain insurance. The Upton Amendment provided an additional $8 billion funding pool to support those facing higher premiums as a result of the waiver.
  • Age-Rating. Under the ACA, insurers in the individual and small group market, can charge older individuals no more than 3 times the rate it charges younger ones. The American Health Care Act increases the ratio from 3:1 to 5:1, and gives states the option to establish a higher ratio, if desired.

What's Next?

The American Health Care Act now moves on to the Senate for consideration, where it faces an uncertain future. Most likely it will not pass the Senate in its current form and will need additional amendments to garner enough votes to do so. It is also possible that the Senate may introduce its own ACA repeal and replacement bill. Regardless, both the House and the Senate must pass identical bills before it can go to the President for signature. Thus, if any Senate bill that is passed differs from the House version, the bill would either need to go back to the House for a vote, or a new compromise bill must be negotiated by a bicameral conference committee, which will then need to be passed by both chambers prior to being signed by the President into law.

In the meantime, absent further guidance or direction, employers must continue to comply with the ACA.

A side-by-side comparison of the American Health Care Act to the ACA follows. A section-by-section summary of the American Health Care Act is available here.

Side-by-side Comparison to the ACA

Potential changes coming to the ACA are summarized in the following table:

Affordable Care Act

American Health Care Act-DRAFT (May 4, 2017)

Employer Requirements
  • Offer affordable coverage with minimum value to FT employees working on average 30 or more hours per week or else potentially face penalty
  • Remains but penalty for not complying is $0
  • Employer mandate penalty
  • Reduces $2,000/$3,000 penalties to $0, retroactive to 1/1/16.
  • Employer reporting/disclosure
  • Simplified reporting anticipated
  • Current reporting continues until new reporting mechanism is put in place, or further guidance to the contrary from the IRS
  • Increase wellness incentives to 30% (50% for smoking cessation) from 20%
  • No change
Premium Assistance
  • Subsidize cost of coverage through premium and /or cost sharing reductions determined based on household income
  • Ends subsidies and cost sharing reduction payments beginning in 2020
  • Creates new age-adjusted, refundable tax credits beginning 2020 per individual ($14,000 cap family)
    • $2,000 if < age 30
    • $2,500 if age 30 and < age 40
    • $3,000 if age 40 and < age 50
    • $3,500 if age 50 and < age 60
    • $4,000 if age 60 and >
  • Phase-out for incomes >$75,000 (indiv.)/$150,000 (family)
  • Advance payment of tax-credits permitted
  • Available for catastrophic health coverage
  • No premium tax credits to purchase plans that offer elective abortion coverage (although rider could be purchased)
Individual Mandate
  • Require health insurance for nearly all or pay penalty
  • Reduces penalty to $0 (retroactive to 1/1/16); encourages individuals to maintain continuous coverage by requiring insurers to charge 30 percent higher premiums for those who have a gap in coverage of greater than 63 continuous days.
Medicaid/CHIP
  • Expand Medicaid/CHIP
  • Ends ACA expansion by 2019
  • Establishes per capita approach to funding
  • Establishes $10 billion safety net funding program for those states that had not elected to expand Medicare for FY2018-FY2022
  • Allows states to impose work requirements for some Medicaid beneficiaries
Use of High Risk Pools
  • Temporary use of high-risk pools permitted (2010-2013)
  • Establishes program (Patient and State Stability Fund) from 2018-2026 for state use for a variety of initiatives, including high risk pools, reinsurance programs, subsidize providers or programs to promote access to preventive care services
  • Appropriates $15 billion per year for 2018 and 2019; $10 billion annually from 2020-2026 for a total of $100 billion, to be allocated among states
  • Empowers CMS to create Federal Invisible High Risk Pool and appropriates $15 billion for 2018-2026 to carry out program
  • $8 billion appropriated to states that apply for a waiver from pre-existing condition exclusions to provide financial support to those impacted to lower premium costs for 2018-2023 calendar years
Plan Design
  • Cover 10 essential health benefit categories (individual and small group markets)
  • States will be able to apply for a waiver and set up own standards beginning in 2020
  • 90-day waiting period max
  • Retained
  • Bronze, Silver, Gold and Platinum metal tiers
  • Actuarial value requirement eliminated
  • No pre-existing condition exclusions; continuous coverage requirement
  • States can apply for a waiver beginning in 2019 and charge higher rates for those with pre-existing condition who had experienced a lapse in coverage of more than 63 days, provided that the state also set up a program to help high-risk patients obtain insurance
  • Cover overage children to age 26
  • No annual or life time limits on EHB
  • 100% preventive coverage and limits on cost sharing
  • Provides for transitional relief for “grandmothered” plans, renewals through end of 2018
  • Retained
Health Savings Accounts (HSAs)
  • Leaves in place existing HSA rules
  • Increases maximum contributions to amount of deductible and out of pocket limit ( at least $6,550/$13,100 in 2018)
  • Catch up contribution for both spouses to same HSA account beginning in 2018
  • Special rule for certain med expenses established before HSA account set up (beginning in 2018)
  • Requires high deductible health plan (HDHP)
  • Retained
  • No reimbursement of OTC drugs and medicines
  • Repealed
  • 20% excise tax on non-medical reimbursements
  • Reduced to 10%
Financing
  • Individual and employer mandate penalties
  • Not assessed beginning in 2016
  • Cadillac tax
  • Delayed until 2026
  • Increase in Medicare payroll tax on high cost individuals by .9% on wages in excess of $200,000 (individual) and $250,000 (married)
  • Repealed beginning in 2023
  • Tax on health insurance issuers
  • Excise tax on the sale of medical devices
  • New tax on pharmaceutical manufacturers
  • Excludes over-the-counter drugs and medicines from HSA and FSA reimbursement
  • Tanning tax
  • Net Investment Tax (3.8%)
  • Health insurer deduction limitation on compensation paid to an officer, director, or employee greater than $500,000
  • Repealed beginning in 2017
  • Small business tax credit
  • Repealed beginning in 2020. Not available for plans providing abortion coverage 2018-2020
  • Deduction for Medicare Part D Subsidy Expenses
  • Repealed- reinstates business expense deduction for retiree drug costs without reduction for the subsidy amount beginning in 2017
  • Income threshold for medical expense deduction
  • Decreases adjusted gross income threshold from 10% to 7.5% for all taxpayers beginning in 2017
Premium variation (individual and small group markets)
  • Premium variation limited to 4 factors: age (3:1 ratio), geographical rating, family composition, and tobacco use (1.5:1 ratio)
  • Permits premiums to vary by age by a 5:1 ratio, states can apply for a waiver to implement higher ratio
Flexible Spending Accounts
  • Sets contribution limit at $2,500 (adj. annually for inflation) (2017 limit is $2,600)
  • Prohibits reimbursement of OTC medicines and drugs
  • Repealed beginning in 2017

For More Information
For more information about this ACA Pathways or about any other health care reform-related provisions, please contact your Burnham Benefits consultant or Burnham Benefits at:

Burnham Benefits
949.833.2983
inquiries@burnhambenefits.com


Burnham Benefits does not engage in the practice of law and this publication should not be construed as the providing of legal advice or a legal opinion of any kind. The consulting advice we provide is intended solely to assist in assessing its compliance with the Patient Protection and Affordable Care Act and other applicable federal and state law requirements, and is based on Burnham Benefit’s interpretation of federal guidance in effect as of the date of this publication. To the best of our knowledge, the information provided herein, and assumptions relied on, are reasonable and accurate as of the date of this publication. Furthermore, to ensure compliance with IRS Circular 230, any tax advice contained in this publication is not intended to be used, and cannot be used, for purposes of (i) avoiding penalties imposed under the United States Internal Revenue Code or (ii) promoting, marketing or recommending to another person any tax-related matter.

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