Just the Facts - The House ACA Repeal Bill

Posted on 5/7/17

The American Health Care Act (AHCA) passed the U.S. House of Representatives on May 4, 2017 by a very narrow margin (217 to 213). This bill is the House’s version to repeal and replace the Patient Protection and Affordable Care Act (PPACA, ACA, Obamacare…take your pick). There is a great deal of punditry, commentary, and emotion involved on both sides of the aisle as it relates to the AHCA and repealing the Affordable Care Act, but getting down to brass tacks, what is really in the repeal bill?

AHCA Round 1

The House Ways and Means as well as the House Energy and Commerce Committees are the primary committees that have jurisdiction over healthcare originally introduced the AHCA to less than stellar reviews and the floor vote was cancelled due to lack of support. The original AHCA contained the following provisions:

• Eliminated the Individual Mandate, the ACA’s requirement that all individuals have health insurance or pay a penalty, by reducing that penalty to zero for all individuals who do not maintain minimum essential coverage. The incentive in the AHCA to have coverage is that insurers can charge a 30 percent upcharge on premiums for individuals who had a lapse in coverage of more than 63 days. One should note that this premium upcharge generally only applies to coverage purchased in the individual or small group markets.
• Eliminated the Employer Mandate, otherwise known as “pay or play”, by reducing the penalty to zero for all applicable large employers (ALE) that do not offer coverage to their full-time (defined as 30 or more hours per week) employees.
• Replaced the ACA subsidies to purchase insurance with income-capped, age based tax credits that are advanceable and refundable in nature. These credits are much lower than the previous ACA subsidies and must be used to purchase state-approved insurance or unsubsidized COBRA coverage.
• Rolled back the ACA’s Medicaid expansion effective January 2020.
• Converted Medicaid to a per capita grant instead of a federally guaranteed grant based on eligible individuals. This means that states would get a lump sum for each Medicaid enrollee.
• Almost doubled the amount that can be contributed to Health Savings Accounts (HSAs) and made it easier to use HSAs to pay for a wider arrange of health-related products and services.
• Delayed the so-called “Cadillac Tax” until 2025. Recall the Cadillac Tax is a 40% excise tax paid by insurers on health plans with premiums exceeding $10,800 for individuals and $29,500 for families.
• Repealed almost all of the ACA’s penalties in 2018.
• Changed the age banding rules where an insurer could only charge an older person 3 times as much as a younger person to allowing insurers to charge 5 times as much. The theory in this is that if an insurer can charge an older and presumably more expensive person to insure 5 times the premium of a younger person, that the premiums for younger people would go down.

AHCA Round 2

Due to the lack of support for the AHCA, a number of amendments have been added to the bill to garner the votes necessary for yesterday’s passage. Many relevant ones will be outlined here, but the key amendment to push the bill over the finish line was introduced by Representative Fred Upton of Michigan:

• The Upton amendment added an additional $8 billion to help people with pre-existing conditions pay for medical costs. There is wide speculation that this amount falls far short of the needed amount so that people with pre-existing conditions would not be priced out of coverage.

Some of the other amendments that made changes to the AHCA include:

• Clarified that the 30 percent upcharge on people with a lapse in coverage only applied to the individual and not the small group market.
• Immediately prevented additional states from opting into the ACA’s Medicaid expansion.
• Allowed states to impose a work requirement for nonelderly, nondisabled, non-pregnant adults as a condition of Medicaid coverage.
• Delayed implementation of the Cadillac Tax by an additional year (moving it from 2025 to 2026).
• Allowed states to choose to receive Medicaid funding as a block grant rather than the previous per capita amount. A block grant is a fixed amount of federal funding regardless of the number of enrollees. The theory being that states would have more control over the populations it would cover and the services offered. Keep in mind that these block grants are for Medicaid populations and not a state’s elderly or disabled populations which fall under Medicare.
• In states that elected to expand Medicaid, they could retain their enhanced match funding for all expansion enrollees that were enrolled in Medicaid prior to the end of 2019. As these enrollees lose eligibility they would be forced out of the program. Enrollees generally lose Medicaid eligibility by finding work that causes their income to exceed Medicaid guidelines. It is important to note that these income guidelines revert to the amount specified under non-expanded Medicaid and not the income levels specified in expanded Medicaid.
• Allowed states to waive the ACA’s essential health benefits requirements and define their own set of essential health benefits. A state would only be able to do so if they could show that defining their own essential health benefits would reduce the cost of insurance coverage.

The amendment getting the most coverage is part of one added by Representative Tom MacArthur of New Jersey that would:

• Allow states to waive parts of the ACA’s community rating rules. These are the rules that require insurers to charge the same price to people regardless of preexisting conditions or other factors. This waiver would only be granted if the state provides a high-risk pool (or some other funding mechanism) to help people with preexisting conditions obtain coverage.

Can the AHCA Survive the Senate?

Now that the AHCA has passed the House of Representatives, it moves on to the Senate where Republicans have a 52-48 vote majority. The AHCA was introduced via a process called reconciliation which is a way of basically saying that legislation only needs a simple majority of 51 votes to pass (there are a bunch of other rules regarding reconciliation, but the key one is that it allows legislation to avoid a filibuster and pass with a simple majority vote). Given the Senate is usually considered much more moderate and deliberative, it is an almost certainty that the Senate will change the AHCA and some pundits forecast them writing their own bill. IF the Senate passes the AHCA in some form, the bill would then need to go to conference committee where differences between the House version and the Senate version are resolved as both the House and Senate must pass bills that have the exact same wording. Once some form of the AHCA comes out of the conference committee, there is no guarantee that bill could pass the House and/or Senate.

All of this means that even though the President and House of Representatives are celebrating passing the AHCA, it does not in any way mean that the repeal and replace of the ACA is imminent. As a long-time watcher of this process and politics in general, I am not sure whatever changes the Senate comes up with and the bill that comes out of the conference committee would be able to pass the House given how polarized the Republican caucus is. BWSI will continue to monitor developments on healthcare reform legislation and update as it becomes available.