On Thursday, May 4, the House passed by a narrow margin the American Health Care Act (AHCA), the House Republican plan to repeal and replace major provisions of the Affordable Care Act (ACA).
The AHCA does not repeal the ACA in its entirety. It repeals the individual and employer mandates, actuarial value requirements, premium tax credits, and cost sharing reductions, replacing these provisions with an alternative approach to tax credits, more significant variations in premiums based on age, potentially less-generous benefit coverage and penalties for those who fail to maintain continuous coverage. The proposed legislation dramatically restructures Medicaid financing, and while it maintains authority for the ACA Medicaid expansion, it would eliminate enhanced federal funding for states that adopt expansion after March 2017 and significantly limit enhanced federal funding after January 2020 for states that have already implemented the ACA Medicaid expansion. Key provisions include:
- Repeal of individual and employer mandates;
- Medicaid per capita cap and state block grant option;
- Elimination of enhanced funding for Medicaid expansion;
- Partial reversal of Medicaid Disproportionate Share Hospital (DSH) cuts;
- Restructuring of tax credits for Marketplace/individual market coverage;
- State waiver option to opt out of insurance premium rating protections and essential health benefits;
- Elimination of most ACA taxes, including the device tax, the insurer tax and a delay in the “Cadillac Tax”; and
- $149 billion in new funds, primarily for states and insurers, to stabilize the individual and small-group market (e.g., establish high-risk pools, reinsurance programs), support maternity and newborn care and mental health and substance abuse treatment, and help people with pre-existing conditions in states that apply for waivers to permit rating on health status).
The House-passed bill retains most of the provisions that were in the original bill scored by the Congressional Budget Office (CBO), but also includes a number of amendments that have been added since the original bill was pulled from the floor on March 24. Following is a short summary of the last three major amendments to the proposed legislation (the Palmer, MacArthur and Upton amendments).
- Federal Invisible Risk Sharing Program. The Federal Invisible Risk Sharing Program would establish a “virtual” high-risk pool to address insurer concerns about insufficient funding for high-risk enrollees’ costs (the ACA’s $20 billion three-year reinsurance program to address high-risk enrollee costs has expired). This funding would go directly to insurers rather than to states. The program would provide $15 billion over nine years (2018-2026), which is unlikely to have a significant effect on premiums.
- State Waivers. The MacArthur amendment allows states to replace the Essential Health Benefits (EHB) provisions of the ACA with a state-defined package of benefits only for individual and small-group health insurance coverage, to waive the AHCA’s 30% continuous enrollment penalty and instead use health status as a rating factor for up to 12 months for any enrollee with a gap in coverage, and to increase the percentage by which premiums can be increased for older enrollees.
- Prohibitions on Gender Rating and Limitations on Access to Coverage. The MacArthur amendment also contains language that generally prohibits premium rating by gender under the AHCA, or construing anything in the AHCA as permitting health insurers to “limit access to health coverage for individuals with pre-existing conditions.” Despite the AHCA, as amended, continuing to prohibit health insurers from rejecting applicants on the basis of a pre-existing condition or imposing a pre-existing condition exclusion, the legislation would permit states to allow insurers to charge significantly higher prices to certain individuals with pre-existing conditions, which could as a practical matter limit their access to health coverage.
- Financial Hardship Assistance. The Upton Amendment creates an $8 billion fund, available from 2018 through 2023, that would be distributed among states that waive the AHCA’s 30% continuous enrollment penalty and institute premium rating based on health, as allowed under the MacArthur Amendment. Those states must use the funds to provide assistance to reduce premiums or other out-of-pocket costs of individuals who are subject to an increase in the monthly premium rate for health insurance coverage as a result of such waiver. Since these funds are only available to states with waivers to rate based on health status, it is difficult to ascertain the number of individuals who could be affected by this provision. However, the relatively small amount of new funding ($1.6 billion per year spread across multiple states) would not cover a significant amount of the costs for those with pre-existing conditions and adds only a marginal amount to the $130 billion over nine years previously allotted to states and insurers.
While these amendments were the focus of considerable debate among House Republicans and the focus of the national media, the underlying and dramatic changes to the Medicaid program and ACA tax credits—including elimination of Medicaid expansion, the proposal to cap federal Medicaid funding to states, and reductions to premium subsidies especially for low-income and older Americans—remain in the bill unchanged and are likely to have far greater implications for coverage. While CBO has not scored the AHCA as revised and passed in the House, it seems clear that the net effect of the proposed legislation, if enacted, would be to cut billions of dollars in federal dollars from the national healthcare system, and thereby add millions of people—principally poor, older or both—to the ranks of the uninsured. The bill is widely expected to be altered significantly in the Senate.
Click here to view the full AHCA Implementation Timeline.