Senate Bill to Repeal & Replace ACA

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Yesterday, Republicans in the U.S. Senate released a 142-page discussion draft of their bill to repeal and replace the Affordable Care Act (ACA).  After the House of Representatives passed the American Health Care Act (AHCA) last month, Senate Republicans proclaimed they were going to write their own bill rather than vote on the AHCA.  Yet despite those claims, the draft language in the Senate’s Better Care Reconciliation Act (BCRA) is surprisingly similar to that of the AHCA but with some key differences.

As with the AHCA, BCRA focuses primarily on changes to the individual insurance market and Medicaid.  The key differences between the two come down to the way in which they would phase-out Medicaid expansion, restructure financing of the overall Medicaid program and change eligibility criteria and the calculation of subsides for buying individual health insurance coverage.  BCRA does retain the AHCA provisions that would impact employer-sponsored group health plans and these provisions have not changed much with the exception of some of the effective dates.  Highlights of BCRA are outlined below:

Provisions Impacting Employer-Sponsored Plans:

  • Employer and Individual Mandate penalties reduced to $0 as of January 1, 2016.
  • Cadillac Tax delayed until January 1, 2026.
  • Limits on salary reduction contributions into health flexible spending accounts (FSAs) removed for plan years beginning on or after January 1, 2018.
  • Prohibition on reimbursement for over-the-counter medications without a prescription eliminated for plan years beginning on or after January 1, 2017.
  • Health savings account (HSA) contribution limits increased to match out-of-pocket costs for high-deductible health plans effective January 1, 2018.
  • Reduces penalty for HSA reimbursement of non-qualified expenses from 20% to 10% effective January 1, 2017.
  • Allows spouses to make catch-up contributions to the same HSA effective January 1, 2018.

Other Major Provisions:

  • Repeals many of the ACA’s taxes and fees, such as the health insurance provider’s fee, the medical device tax, the net investment income tax and the additional Medicare payroll tax.
  • Retains the ACA’s premium tax credits but restricts eligibility to individuals with incomes at or below 350% of the federal poverty line (i.e., a reduction from the current 400% level).
  • Alters the amount individuals will receive in premium tax credits by tying it to a less generous “median cost benchmark plan” rather than the second lowest cost silver level plan.
  • Individuals eligible for employer-sponsored coverage would be ineligible for premium tax credits regardless of whether the employer coverage is affordable.
  • Funds the ACA’s cost-sharing subsidies through 2019 but repeals the subsidies starting in 2020.
  • Phases out the ACA’s Medicaid expansion over a three year period and converts the entire Medicaid system into a per capita program (or a block grant program at the option of the states) with increases in funding tied to the urban consumer price index.

Senate Majority Leader Mitch McConnell plans to hold a vote on BCRA by the end of next week.  Before the vote can occur, the Congressional Budget Office (CBO) must score the bill in terms of its cost and the projected impact on the number of uninsured.  The CBO estimate is expected to be released early next week.

At this point, it is far from clear that Republicans have the votes to get BCRA through the Senate.  A minimum of 50 out of 52 Republican Senators would need to back the bill as no Democrats are expected to vote in favor.  Initial responses to the draft language suggest Senator McConnell may struggle to get 50.  Five Republicans have already voiced opposition to the bill so it is very likely that amendments will be proposed as a way to get more Republicans on board.

Bottom line – there is still a long road ahead for repealing and replacing the ACA.  Even if BCRA passes through the Senate, any differences between BCRA and the AHCA will need to be ironed out in conference with a single version sent back to the House and Senate for passage before going to the President for signature.  But with all eyes on the Senate, the next week is shaping up to be an interesting one.  Keenan will continue monitoring ongoing developments and keep you updated.