House Passes Bill to Repeal & Replace the ACA

House Representatives’ votes are in—does this mean the Affordable Care Act is out?

On Thursday, May 4 the House of Representatives (House) passed the American Health Care Act (AHCA)—the bill to repeal and replace most of the Affordable Care Act (ACA).

The bill repeals the Individual Mandate and the Employer Mandate as well as multiple taxes previously imposed by the ACA.

The bill also gives states the ability to opt-out of key ACA provisions, such as:

• Allowing states, rather than the federal government, to define which benefits are “essential” and must be included in health insurance plans; and
• Allowing states to permit insurers to charge higher premiums to those people with pre-existing conditions. 

Opting out of these requirements would require each state to establish a high-risk pool plan or similar program for people with pre-existing conditions.  States opting out of these provisions will also have to attest that their overall actions are expected to reduce premiums, increase the number of people covered, increase choices, stabilize the insurance market, or any combination of the preceding. 

This way, some states can choose to continue on an ACA-like path, and others can go back to what feels more like the pre-ACA days.

What now?

The bill will go to the Senate next. Please keep in mind the Senate is expected to make some drastic changes to this bill, so nothing written in the House bill is set in stone. 

Republicans have 52 seats in the Senate and they need 50 votes to pass the AHCA (technically, they need 51 votes, but Vice President Mike Pence can cast a tiebreaking vote if there is a 50-50 split in the Senate).  They’re going to need all but two Senators on board to pass the AHCA since not one Democrat is expected to vote in favor of this bill. 

In the past few months we’ve seen how difficult it was to get House Republicans in agreement on a bill, and that difficulty will likely carry over into the Senate.  Expect quite a bit back and forth between Republican Senators on how to proceed with the bill, and this could take several weeks to several months. 

If Republican Senators revise and pass a bill, it will go back to the House for what is expected to be an up-or-down vote.  Assuming passed again in the House, it would then go to President Donald Trump to sign into law. 

If we get to the point where the AHCA becomes law, the timing of changes are not all expected to be immediate.  For example: In the House bill, the Individual and Employer Mandates would be retroactively repealed to 2016, but the most significant changes in the individual market would not take effect until 2019 and 2020.  

Here’s a summary of some of the key changes included in the House bill (again, please keep in mind the Senate may make changes to these items):

Individual Mandate

If you don’t have insurance; you won’t have to pay a penalty to the government.

However, if you’re uninsured for more than 63 days, you can be charged a 30% late enrollment penalty or be underwritten based on your health status, depending on which option your state chooses to pursue. 

State Waivers 

States can request a waiver to:

1. Increase the age rating ratio from 3:1 to 5:1 (meaning older people can be charged a premium of five times more than younger people)
2. Use health status as a rating factor instead of a late enrollment penalty
3. Specify their own essential health benefits 

To request waivers, states must implement a high-risk pool plan or similar program. Federal funding would be available to help finance some of the cost of a high-risk pool plan. 

Subsidies 

Cost-sharing reduction subsidies that help reduce deductibles and copays are eliminated in the House bill.  Premium tax credits are preserved but in a different way… 

Under the AHCA, you would be provided a fixed dollar amount to purchase coverage. That dollar amount would range between $2,000 – $4,000 per person, and the amount of the credit would primarily be based on age (older people receiving larger credits than younger people). Families could receive a credit of up to $14,000.  The credits would start to be phased out for people earning more than $75,000 ($150,000 for joint tax filers), and the credit would not be available to people who have access to employer-sponsored or government health insurance programs, like Medicare. The credits could be applied towards any plan a state approves, such as an on-Exchange plan, off-Exchange plan, or COBRA.   

Employer Mandate

The Employer Mandate is eliminated under the AHCA, but it’s reporting requirements are not. Future regulatory guidance could simplify or suspend the reporting requirements. 

ACA-Imposed Taxes

There are approximately 20 direct and indirect taxes imposed by the ACA. The AHCA would repeal all but one of those taxes. The Cadillac Tax. It wouldn’t go anywhere, but its implementation date would be delayed until 2026. 

HSAs and FSAs  

• HSA contribution limits would approximately double.
• Employers could decide how much their employees can contribute to an FSA rather than having a federally imposed cap.  

Medicaid

Medicaid expansion funding would eventually be cut, and future Medicaid funding would be converted to a fixed, per capita amount. States could also elect to receive block grants. Additional funding would be available to states that imposed a work requirement on non-disabled, non-elderly and non-pregnant adults. 

Medicare

Medicare is essentially untouched.

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