May 5, 2017
On May 4, 2017, the United States House of Representatives passed the American Health Care Act (AHCA) by a narrow vote of 217 to 213. The AHCA seeks to repeal and replace some provisions of the Patient Protection and Affordable Care Act (PPACA). Like PPACA, the AHCA vote saw, generally, a partisan split; all House Democrats voted against the bill, along with twenty House Republicans.
The AHCA now moves to the United States Senate, where Republicans hold a narrow 52–48 majority. To pass the Senate, the bill needs at least 50 votes; Vice President Mike Pence will cast the deciding vote in the event of a tie.
Since its original introduction in March, the AHCA has been amended numerous times in an effort to garner the votes needed to pass the House. Many of the amendments introduced additional changes to Medicaid but left most of the AHCA’s provisions in place. For additional details on the original provisions of the AHCA, please review our prior publication. Some of the amendments most relevant to employers in the current version of the bill include:
- Moving forward the repeal of most PPACA taxes from 2018 to 2017.
- Moving back the effective date of tax on high-cost employer-sponsored health coverage (“Cadillac Tax”) from 2025 to 2026.
- Clarifying that the 30 percent continuous coverage surcharge for individuals with a gap in coverage applies only in the individual market and not in the small group market.
- Changing the age rating ratio in the individual and small group markets from 3:1 to 5:1, and permitting a state to adopt a higher ratio through a waiver.
- Immediately preventing additional states from expanding Medicaid.
- Providing the Senate with flexibility to enhance tax credits for health coverage for individuals ages 50 to 64.
- Allowing states to waive PPACA’s essential health benefits (EHB) requirement upon a showing that doing so would result in a decrease in the price of insurance coverage. Although a waiver of the EHB requirement would primarily impact enrollees in the individual and small group markets, this provision may also affect plans offered by large employers. Large employers are not required to cover EHBs, but those that are covered cannot be subject to annual or lifetime dollar limits. Self-insured employers may have additional latitude to place annual or lifetime dollar limits on certain items or services through choosing a benchmark plan in a state that has obtained an EHB waiver.
- Allowing states to waive aspects of PPACA’s community rating rules, which require insurers to charge the same price to consumers in the same geographic area regardless of a pre-existing condition or other health factors. A waiver would allow carriers to establish rates based on the health status of the insured. Waivers would only be permitted if the state provides funding for high-risk pools so that people with pre-existing conditions may obtain coverage.
- Providing $8 billion of additional funding over five years to states that obtain waivers from PPACA’s modified community rating rules. This additional funding is intended to help states assist individuals who experience an increase in the cost of their premiums due to a pre-existing condition or lack of continuous coverage.
WHAT REMAINS OF THE ACA?
Although reconciliation provides a pathway to repeal and replace provisions of PPACA with fewer legislative barriers, a bill passed through budget reconciliation cannot accomplish a full-scale repeal of PPACA. Reconciliation rules limit Congress’ ability to repeal provisions of PPACA that do not impact the federal budget.
Thus, many of the most popular consumer protections of PPACA remain. The AHCA does not impact the requirement to cover dependent children to age 26 or the requirement to cover preventive care without cost-sharing. However, the amendments to the AHCA permitting state waivers of PPACA’s essential health benefits and community rating requirements would loosen some of PPACA’s protections in the states that obtain them. An EHB waiver would allow insurers in a state to provide minimum benefits with more exclusions. A community rating waiver would allow insurers to charge individuals with pre-existing conditions higher premiums, even though the insurer would not be permitted to refuse to sell a plan to the individual.
Notably, the AHCA does not repeal the Code 6055 and 6056 reporting requirements for insurers, self-funded health plans, and Applicable Large Employers (ALEs) subject to the Employer Mandate. However, it is anticipated that the Form W-2 simplified reporting requirement contained in the AHCA would replace the current reporting requirement for ALEs.
The fate of the AHCA remains uncertain. Moderate Senate Republicans, particularly those representing states that received federal funding to expand Medicaid under PPACA, have criticized components of the AHCA. It is questionable whether some provisions comply with Senate reconciliation rules as well. These factors, combined with an updated score from the Congressional Budget Office (CBO), may make for a slow progression through the Senate with additional amendments anticipated.
For more information about these and other provisions of the AHCA, please review this article. It summarizes the provisions of the AHCA and the amendments included in the version passed by the House. Gallagher Benefit Services and Hill, Chesson & Woody will continue to monitor developments on healthcare reform legislation and regulation and will provide you with relevant updated information as it becomes available.
Should you have any additional questions, please contact our office at (919) 403-1986.