Today, the House of Representatives passed the American Health Care Act (the “AHCA”). The AHCA was previously introduced in March but supporters failed to muster sufficient support to bring the legislation to a vote. Recently, however, the AHCA was given new life after House members agreed to an amendment that would allow states to waive certain aspects of the Affordable Care Act (“ACA”). The AHCA is being touted by some as the law that “repeals and replaces” the ACA, though many of the ACA’s provisions remain intact.
The key takeways outlined in our March 9th blog entry on the AHCA have not been altered by the new amendment. The individual and employers mandates would still be repealed, though the employer reporting obligations under Section 6055 and 6056 of the Internal Revenue Code would likely continue. In place of the individual mandate would be the surcharge applied on individual market premiums to individuals who have a lapse in coverage of more than 63 days. The AHCA would repeal most of the ACA-related taxes, but many of the popular aspects of the ACA, such as coverage of dependents until age 26 and free coverage of preventive care, will remain in place.
The new amendment would allow states to waive the ACA provision that restricts how insurance providers determine premium rates. Currently, the ACA requires that insurers in the individual and small group market set premium rates taking into consideration only the coverage tier, community rating, age (as long as the rates do not vary by more than 3 to 1), and tobacco use. The amended AHCA would allow states to submit an application to apply a higher age rating ratio and to include health status of an individual as a basis for determining the premium rate. In order to allow insurance companies to apply health status as a rate factor, applying states would need to establish high-risk insurance pools for individuals who might not be able to afford insurance coverage due to health conditions.
Additionally, the amended AHCA would allow states to waive the essential health benefits requirement under the ACA in lieu of establishing their own definitions of essential health benefits. Under the ACA, insurance plans in the individual and small group markets must cover the following essential health benefits – ambulatory patient services, emergency services, hospitalization, maternity and newborn care, mental health services and additional treatment, prescription drugs, rehabilitative services and devices, lab services, preventive care, and pediatric services.
It is currently being reported that the amended AHCA contains a provision that would allow employers providing health benefits through large-group insurance policies or self-insured plans to avoid the ACA’s prohibition on imposing annual and lifetime dollar limits on essential health benefits. The AHCA, as amended, does not contain an explicit provision to that effect. However, its interplay with the existing ACA rules could have the same effect.
Here’s why – Large-group insurance and self-insured plans, while not required to cover essential health benefits, cannot apply annual and lifetime dollar limits to those benefits when they do cover them. Since the term “essential health benefits” is not defined, the regulations require large-group insurance and self-insured plans to select a federal or state benchmark plan to determine which of their benefits are essential health benefits and therefore cannot be subject to these dollar limits. Current ACA regulations allow sponsors of large-group insurance and self-insured plans to select any federal or state benchmark for this purpose. Under the ACA, every state had to have a benchmark covering each of the essential health benefits. Under the AHCA, it is possible for states to apply to use a very narrow definition of essential health benefits, thus allowing large-group insurance plans and self-insured plans to select those states’ benchmarks and apply annual and lifetime dollar limits to the benefits not included in them. Of course, even if the AHCA becomes law, it remains to be seen whether plans will end up doing so in practice.
Although the AHCA has been passed in the House of Representatives, there remains a considerable amount of uncertainty. The AHCA now moves to the Senate, which will likely wait for the Congressional Budget Office report before acting. Once that report is issued, political and public pressure could cause the Senate to reject the legislation. Additionally, there is some question as to whether the state waiver amendment is permissible under the budget reconciliation process (for a description of this process, see our November 10th blog entry). If the Senate parliamentarian determines that the amendment is not permitted, some Congress members may withdraw their support. Even if the Senate does decide to act, it is likely that the Senate will significantly modify the legislation, meaning that it will go to conference committee for reconciliation.