On Thursday, May 4, 2017, the United States House of Representatives passed the American Health Care Act (H.R. 1628) (AHCA) by the slimmest of margins on a vote of 217-213 with no Democrats voting in favor of the bill. The vote caps weeks of uncertainty as to whether Republicans would be able to make good on their and President Trump’s campaign promises to repeal and replace the Affordable Care Act (ACA). Amendments to the original bill attracted more support from both moderate and conservative Republicans by the introduction of two amendments: one that gives more leeway to the states to request waivers from the more onerous provisions of the ACA that cannot be changed through the budget reconciliation process, and a second one that adds $8 billion of funding to the bill to help improve the “high-risk pools” that could be set up by states to provide coverage to individuals with pre-existing conditions who cannot find affordable insurance in the open market.
What does the American Health Care Act do?
The AHCA would eliminate a number of taxes imposed under 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 such as the poor and elderly. The bill also permits insurers to charge individuals with pre-existing conditions up to a 30 percent higher premium if they have a gap in coverage. The AHCA also makes a number of changes to facilitate use of Health Savings Accounts, including almost doubling the maximum contribution limits, and reduces tax penalties for non-eligible expenses and eliminates caps on contributions to Health Care Flexible Spending Accounts. In previous articles, we provided in-depth summaries of the features of the bill that most affect employers and previously approved technical and policy amendments to the bill.
An amendment to the bill offered by Congressman Thomas MacArthur (R-NJ) permits states to apply for a waiver opting out of the ACA’s essential health benefit requirements, age-rating and pre-existing condition protections if the state creates its own high-risk pool and can demonstrate that it reduces premiums and meets certain public policy requirements. Another amendment offered by Congressman Upton (R-MI) appealed to more moderate Republicans who were concerned about individuals with pre-existing condition exclusions losing coverage by adding $8 billion in federal funding over five years to prop up state high-risk pools. As a result of these two amendments, House leadership was able to secure a slim margin of votes, winning passage for the bill. In a departure from precedent, the House voted on the bill without debate and without a score from the Congressional Budget Office (CBO) as to how much the amended bill would cost and how it would impact the health coverage status of Americans. This break from protocol has been heavily criticized by some Senate Republicans who have vowed to more carefully vet any health care legislation proposed in the Senate. The CBO had previously predicted that the original bill would result in 24 million Americans going without coverage within a decade, largely due to a rollback of Medicaid expansion and the repeal of the individual mandate, and would increase premiums for certain groups such as the poor and elderly.
Which parts of the ACA remain intact under the AHCA?
The insurance market reforms of the ACA, such as coverage of adult dependent children to age 26, the requirement to cover preventive care at 100 percent with no cost-sharing and certain patient protection requirements currently remain intact under the AHCA. However, it remains to be seen how much states will be able to erode the essential health benefit mandates by applying for waivers under the MacArthur Amendment provisions.
The ability of states to apply for waivers from the ACA’s essential health benefit mandates may also impact employers who sponsor self-insured plans. Under the ACA, a self-insured group health plan is not required to cover all the 10 essential health benefits, but is not permitted to impose annual or lifetime caps on essential health benefits and must include essential health benefits in any out-of-pocket maximum calculations. An employer is free to use any state’s list of essential health benefits as a benchmark for purposes of satisfying these requirements. Under the AHCA, 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 to impose new or additional caps or limits on such benefits. Whether employers rush to take advantage of this apparent loophole remains to be seen, as many employers use health benefits as a valuable recruitment and retention tool and may also be constrained from cutting back on benefits due to Employee Retirement Income Security Act of 1974 (ERISA) concerns.
As to the ACA’s contraceptive mandate, also on Thursday, May 4, 2017, President Donald Trump signed an executive order directing the US departments of the Treasury, Labor, and Health and Human Services to look into exempting religious employers from the ACA contraceptive mandate. This was in response to the Supreme Court’s failure to decide whether the contraceptive-coverage mandate requirements and its accommodation violated the Religious Freedom Restoration Act of 1993 (RFRA) for religious nonprofits in Zubik v. Burwell.
What are the next steps?
The bill, which was passed through the budget reconciliation process, now moves onto the Senate for debate. Several Republicans have already voiced concerns with the bill and have vowed to draft their own version of health care legislation, which may be difficult to reconcile with the House version of the AHCA. Republicans, with a 52-48 majority in the Senate, are planning to use the budget reconciliation process to pass health care legislation, which permits them to pass a bill with a simple majority rather than the 60 votes that would normally be required; however, this is by no means an easy task given the Senate’s more complicated budget reconciliation process and lack of consensus around health care reform.
In the meantime, the ACA remains in effect and employers are required to comply with its requirements, such as the employer shared responsibility requirements and until notice to the contrary, the IRS Forms 1094 and 1095 reporting requirements. In fact, the IRS has recently announced it is developing a more accurate system for identifying employers that are not complying with the employer shared responsibility requirements. It will be important for employers to stay abreast of health care reform developments as they begin to assess the impact of these reforms on their health plan design strategies going forward.