This ACA Brief is the fifth in a series of installments that will closely track congressional and administrative actions relating to ACA provisions that affect large employer-sponsored plans.
On May 4, 2017, the US House of Representatives passed H.R. 1628, or the American Health Care Act (AHCA), by a vote of 217 to 213 with all Democrats and 20 Republicans opposing. This vote comes after a tumultuous two months following its introduction (as detailed in our March 16 ACA Brief) and the decision to forgo a vote in March following pushback from the Congressional Budget Office’s (CBO) cost estimate of the legislation. Since then, the bill has been amended several times, including the most recent amendments offered by Tom MacArthur (R-NJ) and Fred Upton (R-MI), which served a pivotal role in getting the bill passed.
Key provisions of the updated bill
As an update to the discussion included in the fourth installment of our ACA Briefs, the key provisions of the AHCA now:
- Permit states to waive certain Affordable Care Act (ACA) requirements such as essential health benefits, the age rating ratio cap, and the limitations on underwriting policies based on health status;
- Provide an additional $8 billion to ease the burden of high risk pools for individuals with pre existing conditions who fail to maintain continuous coverage, bringing the total funding to $138 billion for waiver states;
- Eliminate the individual and employer mandate penalties;
- Increase the age rating ratio cap from a 1 to 3 ratio to a 1 to 5 ratio;
- Impose a continuous coverage penalty in 2019 on those who have a gap in coverage of more than 63 days;
- Permit tax credits for “catastrophic” and certain other products not currently offered on exchanges;
- Phase out the Medicaid expansion;
- Reinstate the employer deduction for the Medicare Part D subsidy;
- Repeal the ACA tax credit in favor of an age-based tax credit with an income-based phase out for high earners;
- Repeal the ACA cost-sharing subsidies in 2020;
- Delay the Cadillac Tax until 2025; and
- Reinstate the full 162(m) deduction for insurance executives.
What does this mean moving forward?
While the AHCA passed the House vote, it still faces several challenges moving forward. As an initial matter, it is unlikely that the US Senate will address the bill until it has an official CBO score. Policy experts argue that moving forward in the Senate without a score could, technically, violate the Byrd Rule (as discussed in the first installment of our ACA Briefs), which would stall proceedings on procedural grounds. Other provisions in the current version of the bill, including state waivers relating to essential health benefits, may also trigger Byrd Rule challenges.
In order to pass in the Senate without Democratic support, Senate Republicans can only afford to lose two votes—which poses a significant hurdle considering the number of concerns voiced thus far by both conservative and moderate Republicans. Key Republican Senators have already made statements indicating that they plan to draft an alternative version of the bill in order to secure 51 votes. As a result, while the AHCA passing the House is another step towards the Republican repeal and replace strategy, the substantive provisions are likely to face substantial changes moving forward.
What does this mean for large employers?
As it currently stands, the House bill leaves several open-ended questions for large employer sponsored plans. First, it is unclear how the waivers for essential health benefits in the MacArthur Amendment will impact self-insured plans and the existing US Department of Health and Human Services (HHS) regulations allowing such plans to choose a state “benchmark” plan in order to define essential health benefits. Further, while additional funding for high risk pools may not directly impact large self-insured plans, the pending CBO cost estimate may cause Congress to seek alternative funding sources for the bill, meaning that self-insured plan sponsors could find themselves in the crosshairs.