On May 4, the U.S. House of Representatives passed the American Health Care Act (AHCA), its version of the Obamacare “Repeal and Replace” legislation. The bill would, among other things, end the individual and employer mandate penalties, change the way premium tax credits are calculated, eliminate the cost sharing subsidies, roll back expanded Medicaid, kill most ACA taxes, and give states the option to charge more for pre-existing conditions while eliminating some of the essential benefits.
The House bill was wildly unpopular and, according to the Congressional Budget Office, would increase the number of uninsured by 23 million people. Several GOP senators said the bill would be dead on arrival in the Senate and that they would need to start over from scratch when creating their version of a health care reconciliation bill. Even President Trump weighed in, calling the House bill “mean” and saying he hopes the Senate version is more generous.
After weeks of closed door discussions, on June 22 we finally got a peek at the Better Care Reconciliation Act of 2017 (BCRA), the Senate’s answer to the House bill. Interestingly, there’s a lot of overlap between the BCRA and the AHCA, much more than many people expected.
We thought it would be helpful to provide you with a quick comparison between the AHCA and the BCRA. Obviously, there’s more to both of these bills, but here are the high points:
INDIVIDUAL MANDATE
| Affordable Care Act |
To help reduce the risk of adverse selection and make the guaranteed issue provision work, most people are required to have health insurance or pay a penalty. |
| American Health Care Act |
Reduces the individual mandate penalty to $0. Adds a12-month, 30% surcharge for people who purchase coverage after a gap of 63 days or more. |
| Better Care Reconciliation Act |
Reduces the individual mandate penalty to $0. No surcharge for late enrollees. Upon enrollment in a new policy, those who had a gap in creditable coverage of more than 63 days in the previous 12 months will be subject to a 6 month waiting period. |
EMPLOYER MANDATE
| Affordable Care Act |
Requires employers with 50 or more full-time equivalents to offer affordable, minimum value coverage or pay a penalty. |
| American Health Care Act |
Reduces employer mandate penalty to $0. |
| Better Care Reconciliation Act |
Reduces employer mandate penalty to $0. |
TAX CREDITS
| Affordable Care Act |
Offers advance premium tax credits to people with incomes up to 400% of the federal poverty level who do not have access to minimum essential coverage and who purchase coverage through a federal or state Marketplace. |
| American Health Care Act |
Phases out the premium tax credits and replaces them with age-adjusted tax credits ranging from $2,000 for people in their 20s to $4,000 for people in their 60s. |
| Better Care Reconciliation Act |
Reduces eligibility for premium tax credits to 350% of the federal poverty level and ties tax credit calculation to a bronze level (58% actuarial value) plan rather than a silver level (70% actuarial value) plan. |
SUBSIDIES
| Affordable Care Act |
Reduces out of pocket expenses for people with incomes up to 250% of the federal poverty level who purchase a silver-level plan through the Marketplace. |
| American Health Care Act |
Phases out the cost-sharing subsidies. Creates state innovation grants that can be used, in part, to reduce out-of-pocket expenses. |
| Better Care Reconciliation Act |
Phases out the cost-sharing subsidies. Creates state innovation grants that can be used, in part, to reduce out-of-pocket expenses. |
ESSENTIAL BENEFITS
| Affordable Care Act |
Requires individual and small group health plans to cover 10 categories of essential health benefits (plus additional essential benefits defined by the states). |
| American Health Care Act |
States can apply for waivers that allow them to eliminate essential health benefits requirements. |
| Better Care Reconciliation Act |
States can apply for waivers that allow them to eliminate essential health benefits requirements. |
PRE-EXISTING CONDITIONS
| Affordable Care Act |
Prohibits insurers from denying coverage or charging more for people with pre-existing conditions. |
| American Health Care Act |
Allows states to set up risk pools for high-risk individuals and to permit insurers to charge more for pre-existing conditions in certain circumstances. |
| Better Care Reconciliation Act |
Prohibits insurers from denying coverage or charging more for people with pre-existing conditions. |
AGE RATING
| Affordable Care Act |
On individual and small group plans, limits age rating to a 3 to 1 basis (insurers can charge older people up to 3 times as much as young people). |
| American Health Care Act |
Expands allowable age rating to 5 to 1 (insurers can charge older people up to 5 times as much as young people). |
| Better Care Reconciliation Act |
Expands allowable age rating to 5 to 1 (insurers can charge older people up to 5 times as much as young people). |
MEDICAID
| Affordable Care Act |
Allows states to expand Medicaid to 133% of the federal poverty level and include healthy adults. The federal government pays for the majority of the expansion. |
| American Health Care Act |
Ends expanded Medicaid and creates block grants for states. |
| Better Care Reconciliation Act |
Ends expanded Medicaid and creates block grants for states. The Medicaid cuts are bigger than the House bill but are phased in over a longer period of time. |
TAXES
| Affordable Care Act |
To pay for the tax credits, subsidies, and expanded Medicaid, the ACA created more than a dozen new taxes, including taxes on insurers, pharmaceutical companies, and high income individuals. |
| American Health Care Act |
Eliminates most ACA taxes and delays the Cadillac tax by several years. |
| Better Care Reconciliation Act |
Eliminates most ACA taxes and delays the Cadillac tax by several years. |
As you can see, both the House and the Senate bill make some big changes to some of the major provisions of the Affordable Care Act. And while there are a lot of similarities between the House and Senate bills, there are a few differences:
- While the Senate version eliminates the individual mandate, it does not include a surcharge for late enrollees like the AHCA does. However, it does provide for a 6 month waiting period.
- While the House version would phase out the premium tax credits and replace them with age-adjusted tax credits, the BCRA continues to base the tax credits on a family’s income; however, the tax credits are lower than under the ACA since they’re based on a lower-value plan.
- While the House version would give states the option of pushing people with pre-existing conditions into high risk pools, the BCRA does not adopt this provision.
- Both the House and Senate version would end expanded Medicaid and create block grants for states. The Senate’s cuts to the program are larger than the House’s but are phased in over a longer period of time.
At this point, it’s unclear what, if anything, will end up passing. The Senate is hoping for a quick vote on their health care bill, but we don’t yet know whether they will have or will get the required votes. Even if the Better Care Reconciliation Act of 2017 does find its way out of the Senate, the House and Senate will then need to work out the differences between the two pieces of legislation and vote on a unified bill. This is a challenge because more moderate Republicans worry about reducing Medicaid benefits, defunding Planned Parenthood, and eliminating covered services while Freedom Caucus members want to cut entitlement programs and do away with government mandates that they feel drive up the cost of coverage. Only time will tell whether there will be a meeting of the minds and lawmakers will send a bill to the President’s desk.
For now, you should advise your clients that there are no immediate changes and that the ACA is still the law. Therefore, the mandates are still in effect, as are the compliance requirements. As soon as that changes, we’ll let you know.