Last week, the House of Representatives passed the American Health Care Act (AHCA) by a razor-thin margin of 217-213. No Democrats supported the bill and 20 Republicans voted against it. Recall in March, the House was forced to pull AHCA Version 1.0 from the floor because leaders lacked the necessary votes for passage. Now its up to the Senate to act.

In the intervening weeks since Version 1.0 was abandoned, various groups of House Republican lawmakers worked to craft proposals that would secure the 216 votes necessary for passage. Thus, much of AHCA Version 2.0 that passed last week is ACHA Version 1.0 with some key additions, such as:

Medicaid – The AHCA makes significant changes to Medicaid. The bill terminates the ACA’s mandatory requirement for States to expand Medicaid for certain childless non-disabled, non-elderly, non-pregnant adults up to 133% of the Federal Poverty Level (FPL). It also sunsets the optional ability for a State to cover adults above 133% FPL, effective December 31, 2017.

The bill preserves the ability of states to cover Medicaid expansion enrollees (under 65, childless, non-disabled, non-elderly, non-pregnant adults whose income is below 133% FPL). Medicaid expansion enrollees who were enrolled in Medicaid expansion prior to December 31, 2019 and have not had a break in eligibility for more than one month, are “grandfathered” and States that have expanded Medicaid coverage as of March 1, 2017 will be reimbursed at a 90% match rate.

Finally, beginning in Fiscal Year 2020 (October 1, 2019), states have the option to receive a block grant in lieu of per capita cap funding to cover certain Medicaid enrollees for 10 fiscal years. Following the end of the 10 fiscal years, if the state chooses not to extend the block grant option, the per capita cap provisions will be applied.

The MacArthur Fix – The AHCA allows states to submit a waiver application to the Secretary of the U.S. Department of Health and Human Services (HHS) to:

  • Increase the age rating ratio above the underlying bill’s 5:1 ratio beginning 2018;
  • Specify their own essential health benefits beginning 2020; and,
  • Replace the underlying bill’s continuous coverage incentive late-enrollment penalty with status rating beginning in 2019, conditional upon a state operating a risk mitigation program or participating in a Federal Invisible Risk Sharing Program (FIRSP).

In the application to HHS, States will explain how the waiver will provide one or more of the following:

  • Reducing average premiums for health insurance coverage in the State;
  • Increasing enrollment in health insurance coverage in the State;
  • Stabilizing the market for health insurance coverage in the State;
  • Stabilizing premiums for individuals with pre-existing conditions; or
  • Increasing the choice of health plans in the State.

The Upton Sweetener – The bill adds $8 billion to the AHCA’s Patient and State Stability Fund to States who have applied and been granted a waiver from community rating, as specified by the MacArthur amendment. It directs that the funds be used in “providing assistance to reduce premiums or other out-of-pocket costs” of individuals who may be subject to an increase in their monthly premium rates because they:

  • Reside in a State with an approved waiver,
  • Have a pre-existing condition,
  • Are also uninsured because they have not maintained continuous coverage, or
  • Purchase health care in the individual market.

The Tax Provisions – The ACHA accelerates relief from the following taxes by one year, making the effective date January 1, 2017:

  • Increase of tax on Health Savings Accounts
  • Limitations on contributions to flexible spending
  • Medical device excise tax
  • Elimination of deduction for expenses allocable to Medicare Part D subsidy
  • Tax on prescription medications
  • Health Insurance Tax (HIT)
  • Remuneration from certain insurers
  • Net investment tax

Repeal of the tanning tax is accelerated by six months, effective June 30. Legislative text and section-by-sections provided by the House Rules Committee are here.

The Senate – Notwithstanding these changes, Senate reaction was swift: Thanks, but no thanks. Senators on both sides of the aisle have said that the Senate, after reviewing the AHCA, will effectively craft their own bill. The challenges for Majority Leader Mitch McConnell (R-KY), Senate Health, Education, Labor and Pensions Committee Chairman Lamar Alexander (R-TN), and Senate Finance Committee Chairman Orrin Hatch (R-UT) are twofold but mirror those faced in the House – Democrats won’t help and the Republican caucus is divided between conservatives and moderates. This will result in a slow and deliberate process for drafting, hearing, and taking votes, and it all won’t start until the Congressional Budget Office delivers a budget score for AHCA, which expected later this month. We will monitor and update as events transpire.