On June 22, 2017, Senate Republicans unveiled draft legislation to move toward repealing portions of the Affordable Care Act (ACA). The draft health care bill, known as the Better Care Reconciliation Act, was hatched behind closed doors without public committee hearings or debate, in response to concerns raised by the US House of Representative’s American Health Care Act (AHCA), which passed by the slimmest of margins on May 4, 2017.
The bill faces an uphill battle as several Republican senators have already come out in opposition to the draft bill, conservatives have criticized the bill not going far enough to repeal the ACA and moderates are uneasy about the impact severe cutbacks to the Medicaid system will have on their constituents. Senator Mitch McConnell had originally vowed to bring the draft bill to a vote this week before Congress recesses for the Fourth of July holiday, but after several senators asked for time to review the bill’s impact the Republicans decided to delay the vote until after the Fourth of July. The Congressional Budget Office (CBO) announced on earlier this week that the Senate bill would increase the number of people without health insurance by 15 million next year and by 22 million by 2026, slightly lower than the 23 million more uninsured that would result from the AHCA. According to the CBO, the Senate health care bill would decrease federal deficits by $321 billion by 2026, as compared to the $119 billion deficit reduction of the AHCA.
What does the Senate health care bill do?
Like the AHCA, the Better Care Reconciliation Act would eliminate a number of taxes imposed by the ACA; eliminate the employer and individual mandates; delay the Cadillac tax; and repeal fees and taxes on health insurance issuers, medical devices and prescription drugs. The bill would also roll back Medicaid expansion under the ACA, reduce Medicaid spending for the states and make premium assistance in the individual market less generous for some consumers (e.g., the poor and elderly). In an effort to address concerns that the elimination of the individual mandate would lead to adverse selection, and to encourage continuous coverage, the draft bill was revised on June 26 to add a provision barring an individual from purchasing insurance for six months in the individual market if they let their insurance lapse for more than 63 days.
In addition, after 2019, the bill eliminates subsidies for lower income individuals to pay for out-of-pocket costs and reduces tax credits for middle-income individuals that offset the cost of premiums. Finally, the Senate bill makes a number of changes to facilitate the use of health savings accounts, including nearly doubling the maximum contribution limits so that individuals can contribute up to the maximum allowed for out-of-pocket costs and also allowing spouses to make additional contributions. The attached chart, prepared by McDermott+ Consulting, provides an overview of both the Senate and House bills and existing provisions of the ACA.
Which parts of the ACA remain intact under the Senate bill?
The draft Senate bill preserves the insurance market reforms of the ACA, such as coverage of adult dependent children to age 26, the ten categories of essential health benefits, and prohibitions on annual and lifetime limits. However, states have the option to apply for waivers from the essential health benefit requirements and certain other provisions of the ACA, and it remains to be seen how much states will be able to erode ACA requirements by applying for such waivers.
Employers who sponsor self-insured plans may also be impacted if states can apply for waivers from the ACA’s essential health benefit requirements. Under the ACA, a self-insured group health plan is not required to cover all ten essential health benefits, but it may not impose annual or lifetime caps on the essential health benefits that it does cover and must include essential health benefits in any out-of-pocket maximum calculations. Employers are free to use any state’s list of essential health benefits as a benchmark for purposes of satisfying these requirements. Under the Senate health care bill, it may be possible for an employer who sponsors a self-insured plan to choose a state benchmark plan with less onerous essential health benefit requirements, which would then permit the employer to either scale back on some of the benefits offered under its plan or impose new or additional caps or limits on such benefits. Whether employers rush to amend their plans remains to be seen, as many employers use health benefits as a valuable recruitment and retention tool and may also be constrained from making changes prior to the beginning of a new plan year and cutting back on benefits due to Employee Retirement Income Security Act of 1974 (ERISA) concerns.
What are the next steps?
Senator Mitch McConnell had originally vowed to bring the draft bill to a vote this week before Congress recesses for the Fourth of July holiday, but after several senators asked for time to review the bill's impact, the Republicans decided to delay the vote until after the Fourth of July.
As the House Republicans did when they passed the AHCA, Senate Republicans plan to use the budget reconciliation process to pass their health care bill with a simple majority rather than the 60 votes that would normally be required. Republicans have a 52-48 majority in the Senate and with Democrats unified in opposition to the bill, can only afford to lose two votes to ensure passage of the bill.
In the meantime, the ACA remains in effect and employers must comply with its requirements, such as the employer shared responsibility requirements, the upcoming PCORI fees and the IRS Forms 1094 and 1095 reporting requirements. Employers should stay up to date on health care reform developments to assess the potential impact of the Senate health care bill on their health plan design strategies.