AHCA: Summary, budget estimates & next steps

The following summary was written by Julius Hobson, Cybil Roehrenbeck and Sidney Welch with Polsinelli PC.

On March 6, 2017, House Republicans released proposed legislation referred to as the American Health Care Act (AHCA) to replace the Patient Protection and Affordable Care Act (ACA), which was signed into law in 2010 under the Obama administration. The House Energy and Commerce Committee and House Ways and Means Committee then marked up their portions of the bill, including consideration of amendments offered.1   

Procedurally, the proposed legislation will go to the House Budget Committee and then the Rules Committee. If the bill passes the House, it will go to the Senate where, under budget reconciliation rules, the only changes that can be made will be those which impact the budget. Passage by the Senate will require only a simple majority vote. Once approved by the Senate, it would be signed by President Trump. If, however, the president vetoes the bill, Congress could override the veto with a two-thirds vote of both houses.

Referred to as a “starting point” by Health and Human Services (HHS) Secretary Tom Price, M.D., the American Hospital Association, the American Medical Association, America’s Health Insurance Plans, and the American Association of Retired Persons are just some of the organizations that have opposed the plan. More opposition and changes are anticipated in light of the Congressional Budget Office (CBO) cost estimates, released March 13, 20172, which estimates that nearly 24 million individuals will lose their health insurance coverage if the ACA is repealed and the AHCA is enacted in its current form. 

AHCA Summary 

As proposed, the AHCA calls for the following changes at the federal level…

– Eliminate individual and employer mandates. Beginning in 2016, individual and employer coverage mandate penalties would be reduced to $0 and would, beginning in 2019, be replaced with mandatory penalties for failure to maintain coverage as the incentive to enroll in coverage. Insurers would assess a penalty on any individual who experienced 63 or more continuous days without coverage during a 12-month look-back period, the “Continuous Health Insurance Coverage Initiative.”

– Replace health insurance subsidies with refundable tax credits. In lieu of the ACA’s subsidies to help qualifying individuals pay for insurance premiums, the proposed bill would make available age-based, advanced, refundable tax credits to individuals without another source of coverage starting in 2020. The value of the tax credit would start at $2,000 annually for individuals under age 30 and increase with each decade of age to a maximum of $4,000 annually for individuals over age 60. Families claiming tax credits for multiple family members would be capped at a maximum tax credit of $14,000 annually. The amounts would be updated by CPI+1 annually.

– Delay “Cadillac Tax.” The bill would delay the imposition of the “Cadillac Tax” from high cost employer plans from 2020 to 2025.

– Repeal certain other taxes. The bill would repeal the ACA’s “Premium Tax Credit,” which was designed to help individuals and families with low or moderate income afford health insurance purchased through the marketplace, effective in 2020. This includes a 3.8% tax on investment income and a 0.9% tax at certain income levels ($200,000 for individuals and $250,000 for families). The bill would also repeal taxes on insurers, prescription drugs, indoor tanning, and medical device manufacturers.

– Increase premium age differentials. Allows insurers to charge older customers up to five times the amount the charge younger customers instead of three times the amount.

– Expand health savings accounts (HSA) contributions. The proposal would increase the maximum amount an individual or family could contribute to their HSA (from $3,400 to $6,500 for individuals and from $6,750 to $13,100 for families).

– Defund certain organizations. The bill would bar certain nonprofit organizations that provide abortions from receiving Medicaid reimbursement.

At the state level – the largest savings projected by the CBO at an estimated $880 billion – the bill would…

– Revise Medicaid expansion. The bill would phase out Medicaid expansion by granting federal funds to states on a capped, per-capita basis beginning in 2020 in lieu of matching federal funds to states for anyone who qualifies. It would give states the ability to choose to expand Medicaid eligibility with reduced federal support for additional eligible patients instead of the ACA’s blanket expansion to 138% of poverty level. Further, it would end presumptive eligibility except for children, pregnant women, and breast and cervical patients. It would also provide that cuts to disproportionate share hospitals would not apply in non-expansion states and would be enforced in expansion states until 2020, at which time they would be repealed. It would provide $10 billion to non-expansion states for safety net funding, too.

– Repeal essential health benefits. Beginning in 2020, the federal essential health benefit requirements would be repealed for certain limited benefit plans and states would have authority to set any minimum benefit standards and the AV standards for metal level plans would be repealed allowing states to approve more flexible benefit designs.

– Create a “Patient and State Stability Fund” to stabilize the marketplace. The proposal would create a $100 billion fund for states to use for various purposes, including forming high risk pools, out-of-pocket costs, access to preventive services, and establishing reinsurance programs. 

The following ACA provisions would remain the same…

– Coverage for pre-existing health conditions

– Coverage for dependents until age 26

– Prohibition against annual and lifetime limits on individual coverage

Notably absent from the bill are the following, which may be addressed in other legislation or by executive order…

– Medicare reform

– Drug price increases

– Tort reform

Budget Estimates

CBO estimates that the AHCA would reduce federal deficits by $337 billion over 10 years. This consists of $323 billion in on-budget savings and $13 billion in off-budget savings. The outlays would be reduced by $1.2 trillion over the same period, and revenues would be reduced by $883 billion.

CBO and the Joint Committee on Taxation (JCT) estimate that 14 million more people would be uninsured under the AHCA in 2018. CBO further projects that “following additional changes to subsidies for insurance purchased in the nongroup market and to the Medicaid program, the increase in the number of uninsured people relative to the number under current law would rise to 21 million in 2020 and then to 24 million in 2026.” By 2026, CBO estimates 52 million people would be uninsured, as compared with 28 million who would lack insurance that year under current law.

CBO and JCT estimate that average health insurance premiums in the individual market would be 15 percent to 20 percent higher than under the ACA. This increase is attributed to the elimination of the individual mandate penalties, resulting in fewer healthy people signing up for insurance.

JCT and CBO estimate that the AHCA would result in private sector mandates totaling $156 million in 2017, adjusted annually for inflation. Finally, CBO is uncertain about part of its estimates as it cannot determine “the ways in which federal agencies, states, insurers, employers, individuals, doctors, hospitals, and other affected parties would respond to the changes made by the legislation…”

Next Steps

In accordance with the Congressional Budget and Impoundment Control Act of 1974, the House Budget Committee is scheduled to meet this week to report the reconciliation bill. The Committee’s role is simply to package the two bills from the Energy and Commerce and Ways and Means Committees.

Following the Budget Committee’s action, the House Rules Committee will meet to develop a rule, which would govern floor debate for the AHCA. The Rules Committee may fold bills reported by the Education and the Workforce Committee into the reconciliation package. The House Majority Leadership plans to take the AHCA to the floor next week. Senate Majority Leader Mitch McConnell [R-KY] plans to skip the committee process and take up the House-passed bill.

Note: Medical Association of Georgia (MAG) staff is reviewing the American Health Care Act and will discuss this legislation with MAG’s leadership groups.

Sidney Welch is one of MAG’s endorsed vendors. She is the chair of Health Care Innovation at Polsinelli PC. Welch counsels physicians, physician’s practices, and health care technology clients in transactional, regulatory, administrative law, and litigation matters on a national basis. Go to www.polsinelli.com/ professionals/swelch for additional information. Contact Welch at 404.253.6047 or swelch@polsinelli.com.

1 http://docs.house.gov/meetings/WM/WM00/20170308/105682/BILLS-115-Subtitle__BudgetReconciliationLegislativeRecommendationsRelatingtoRepealandReplaceofHealth-RelatedTaxPolicy-B000755-Amdt-5.pdf

2 https://www.cbo.gov/sites/default/files/115th-congress-2017-2018/costestimate/americanhealthcareact_0.pdf

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