Bill largely mirrors House Bill but with some key differences.
On Thursday, June 22, 2017, Senate Majority Leader Mitch McConnell of Kentucky released a 142-page healthcare “Discussion Draft” of legislation, called the Better Care Reconciliation Act of 2017 (BCRA), which is the Senate version of the Affordable Care Act (ACA) “repeal-and-replace” legislation American Health Care Act (AHCA) passed by the U.S. House of Representatives last month. A summary of the BCRA by the U.S. Senate Committee on the Budget is available here and a section-by-section summary is available here. The unveiling of the Senate bill comes after weeks of drafting by a small group of Senate Republican leadership behind closed doors that has frustrated Democrats and left out many Republicans from the drafting process. Senator McConnell has stated that the Congressional Budget Office will release an estimate of the legislation and is pushing for a Senate vote by the end of next week before the Fourth of July recess. It is unclear whether the Republicans will be able to secure enough votes to pass the bill because at least four Republican senators – Sens. Rand Paul (KY), Ron Johnson (WI), Mike Lee (UT), and Ted Cruz (TX) – have publicly expressed their unwillingness to vote for it as currently drafted.
In large part, the BCRA mirrors the House-passed AHCA. A comparison of the two bills can be found below. Similar to the House bill, the Senate bill would repeal virtually all of the tax increases imposed by the ACA, except for the “Cadillac” tax on high-cost employer-sponsored coverage, which would be delayed through 2025.
Key Issues for Employers
For employers, the most significant change made by the AHCA to the ACA that was retained by the BCRA is the repeal of the employer mandate penalties effective January 1, 2016. The BCRA retains other significant AHCA changes for employers, including unlimited flexible spending accounts beginning next year, and certain enhancements to health savings accounts (HSAs) retroactive to this year1. Of note for employers sponsoring fully-insured group health plans, beginning in 2020 the bill requires states to set their own medical loss ratio rebating rules. It also adds a structure under ERISA (by adding a new Part 8) that would allow for the establishment of association health plans for small businesses or individuals (Small Business Health Plans or SBHPs), allowing them to be treated as large group plans exempt from the community rating and essential health benefit requirements that are currently applicable to small group and individual plans. This new section of ERISA would preempt any and all state laws that would preclude an insurer from offering coverage in connection with an SBHP and would go into effect one year after enactment (and implementing regulations would be required to be promulgated within six months of enactment).
Also significant for employers is what it does not add – the bill does not include a provision eliminating the employer and employee exclusions from taxation on group health plan benefits. Many employers were concerned that the exclusion would be removed as a way to increase revenue to pay for other tax cuts in the bill.
Key Issues for Individuals
For individuals, the BCRA would repeal the ACA’s Medicaid expansion, but at a slower rate than proposed by the AHCA and would tighten the eligibility criteria for premium subsidies (only those earning up to 350% of the poverty level would qualify rather than the 400% threshold in the ACA); however, subsidies would open up for enrollees below the poverty level living in states that did not expand Medicaid. The bill would allocate money for cost-sharing subsidies through 2019 which are used to offset the costs for insurers to offer low-income individuals with coverage that has lower out-of-pocket costs. There had been uncertainty whether these payments would continue which was causing instability in the individual insurance market. Higher-income individuals would see relief from various ACA taxes and fees, including the 0.9% Medicare surtax beginning in 2023 and the 3.8% net investment income tax retroactive to the beginning of this year.
The Republicans are trying to pass the bill through the budget reconciliation process since it allows them to avoid a Democratic filibuster and to pass the bill with a simple majority (rather than 60 votes). However, the Republicans have only 52 Senate seats, which means that to pass, Senator McConnell can only afford to lose 2 votes (Vice President Michael Pence can be the tie breaker). The bill may be too liberal for some Republican senators and too “harsh” for others (who may be waiting for the CBO score hoping it will be more favorable than the analysis after the passage of the AHCA), so it remains to be seen whether the bill, as proposed, will pass or whether it will undergo further revisions to ensure passage. Currently, there are at least 4 Republican senators who have publicly expressed that they would not vote for the bill as currently drafted. The Republicans will not have much time to sort out any disagreement since Senator McConnell has stated that he intends to call a vote next week.
As noted previously, employers and other stakeholders should continue to stay the course on ACA compliance at this time while they monitor for changes as the BCRA continues to make its way through the legislative process.
Comparison of the ACA, AHCA, and BCRA
The chart below compares some of the significant changes proposed by the BCRA to the ACA and the proposed House bill.
Affordable Care Act (ACA)
Proposed House Bill: American Health Care Act (AHCA)
Proposed Senate Bill: Better Care Reconciliation Act (BCRA)
Employer mandate on applicable large employers (ALEs)
No individual or employer mandate effective retroactive to Jan. 1, 2016
Insurers can impose a one year 30% surcharge on consumers with a lapse in continuous coverage (individual market)
“Zeroes” out the individual and employer mandates effective retroactive to Jan. 1, 2016
Does not include the continuous coverage provision the House included as a replacement for the ACA’s individual and employer mandates
Income-based subsidies for premiums that limit after-subsidy cost to a percent of income
Cost sharing reductions for out-of-pocket expenses
Age-based refundable tax credits for premiums, phased out for higher incomes
No cost sharing reductions for out-of-pocket expenses
ACA subsidies phased out after 2019; AHCA credits effective in 2020
Targeted tax credits advanceable and refundable adjusted for income, age and geography
Subsidies based on the cost of a low-level bronze plan rather than a silver plan
Subsidies available to individuals with incomes <350% of the federal poverty level
Subsidies are not available to individuals who are eligible for a group health plan (no affordability or minimum value requirement)
Cost-sharing reduction assistance continues through 2019
Matching federal funds to states for anyone who qualifies
Expanded eligibility to 138% of poverty level income
Federal funds granted to states based on a capped, per-capita basis starting in 2020
States can choose to expand Medicaid eligibility, but would receive less federal support for those additional persons
Phases out ACA Medicaid expansion between 2021 and 2024 (with deeper cuts than the AHCA after that)
Permits states to impose a work requirement on nondisabled, nonelderly, non-pregnant adults
|Premium Age Differences||3:1 (individual and small group plans)||5:1 (and the MacArthur amendment would allow a higher ratio)||5:1 (but allows states to set a different ratio)|
|Health Savings Account Limits||$3,450/$6,900 (2018 limits shown)||Contribution limits increased to maximum out-of-pocket limit for HDHP coverage ($6,650/$13,300) (effective Jan. 1, 2018)||Same as AHCA|
|"Cadillac Tax"||Cadillac tax on high-cost employer plans implemented in 2020||Cadillac tax on high-cost employer plans delayed until 2026||Same as AHCA|
3.8% tax on net investment income
Limit placed on contributions to flexible spending accounts
Annual health insurance provider tax
Over-the-counter medication excluded as qualified medical expense
0.9% Medicare tax on individuals with an income higher than $200,000 or families with an income higher than $250,000
|Repeal of these taxes retroactive to the beginning of 2017 (except for the repeal of the Medicare tax, which would begin in 2023, and FSA, which would begin in 2018)||Same as AHCA|
|Essential Health Benefits||Individual and small group plans are required to offer coverage in ten essential health benefit categories||
Under the MacArthur amendment, individual and small group plans are required to offer the ten essential health benefits, but a waiver option is available
Some Medicaid plans are not required to offer mental health and substance abuse benefits
|Does not contain a specific-essential health benefit waiver but expands the existing ACA Section 1332 waiver to provide states with more flexibility to decide the rules of insurance in their state (but can’t opt out of regulations governing pre-existing conditions)|
No Change: No Pre-Existing Condition Exclusions / Coverage of Children to Age 26 / No Annual or Lifetime Dollar Limits on Essential Health Benefits (EHBs)*
* States may have the ability to re-define EHBs, which could weaken the prohibition on annual and lifetime limits, as the annual/lifetime limit rules and out-of-pocket limit rules apply only to EHBs.
1 Enhancements include an increase in the HSA contribution limits so that they are the same as the out-of-pocket maximums that apply to HDHPs (for 2018, $6,650 for self-only coverage and $13,300 for family coverage), allowing the reimbursement of otherwise eligible expenses incurred up to 60 days before an HSA is established, and allowing both spouses to make HSA catch-up contributions to the same HSA. The penalty for non-qualified HSA distributions was increased to 20% under the ACA; under the AHCA it will go back to 10% retroactive to the beginning of this year.
This alert was prepared for Marsh & McLennan Agency by Marathas Barrow Weatherhead Lent LLP, a national law firm with recognized experts on the Affordable Care Act. Contact Peter Marathas or Stacy Barrow at firstname.lastname@example.org or email@example.com.
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