Late Monday afternoon, House Republican leaders released a two-bill legislative package to “repeal and replace” the Affordable Care Act (ACA). Collectively called the “American Health Care Act” or “AHCA,” the two bills drafted by the Energy and Commerce and Ways and Means Committees reflect efforts by the GOP to identify provisions in the ACA that can be repealed and/or replaced under a special procedure known as budget reconciliation, which requires only a simple majority to win Senate approval. As a result, the AHCA appears to do less in the “repeal” category, takes on some “replace” and ventures far afield with regard to the Medicaid program.
ACA provisions slated to remain
The AHCA does not eliminate the more popular consumer protections in the ACA applicable to commercial healthcare insurance. Remaining intact are the protections against the imposition of lifetime or annual limits in health plans; health status underwriting; and discrimination on the basis of race, nationality, disability, age or sex. Children up to age 26 will continue to be afforded coverage under a parent’s healthcare insurance plan. Pre-existing condition protections remain as well as guarantee availability and renewability of coverage. The essential health benefits requirement, while left untouched for Exchange plans, was eliminated for the Medicaid expansion population. Other important provisions in the ACA also left intact include funding for the Center for Medicare & Medicaid Innovation (CMMI), accountable care organizations, elimination of the Stark Law whole hospital exception, modifications to the False Claims Act, and provisions regarding the timing of “overpayments,” discovery and obligations associated with self-disclosures.
ACA provisions slated for repeal/replace
So what was repealed? The individual and employer mandate. The AHCA introduces a continuous eligibility penalty aimed at encouraging individuals to maintain insurance coverage. To that end, individuals will have to prove that they had creditable coverage during the year and did not have a gap in coverage that lasted for more than 63 continuous days. Failure to do so would result in a 30 percent premium surcharge. Young folks that age out of dependent coverage would need to prove that they enrolled for coverage during the first open enrollment period after their dependent coverage ended. Thus, while the individual mandate technically would be “repealed,” the penalty for failing to maintain insurance coverage remains alive and well under the AHCA. Such provisions are important for preventing adverse selection and it appears that Congress has recognized this as a key factor in stabilizing the individual insurance market.
Also repealed are the numerous taxes in the ACA that were used to help pay for the other elements of the healthcare law. These include taxes on employee health insurance premiums (Cadillac tax), over-the-counter medications and medical devices as well as penalties for flexible spending account contributions over the $2,500 limit and health savings account funds used for non-medical purposes. Instead, the AHCA introduces a new premium tax credit that would be available for those purchasing health plans on the Exchanges beginning in 2020. The tax credit, which is advanceable and refundable on a monthly basis to help defray the cost of premiums in the individual insurance market, would be age-dependent as follows:
- $2,000 for individuals under 30
- $2,500 for individuals ages 30-39
- $3,000 for individuals ages 40-49
- $3,500 for individuals ages 50-59
- $4,000 for individuals ages 60 and over
The means-tested premium tax credits currently in place under the ACA would be maintained through 2019, and the age-dependent premium tax credits proposed under the AHCA would be implemented in 2020.
Individuals would qualify for the tax credits only if they do not otherwise have access to employer coverage, are U.S. citizens, are not incarcerated and are covered by a state-approved individual health insurance plan that does not otherwise cover abortions. The tax credit ends when a taxpayer’s modified adjusted gross income (MAGI) reaches $75,000 ($150,000 for joint filers), and there are a host of additional requirements in the age categories that are tied to the MAGI.
Efforts to stabilize the insurance markets
Specifically, the proposed legislation would create a Patient and State Stability Fund available to states beginning in 2018 through 2026. States could use this funding to:
- Provide assistance to high-risk individuals
- Offer incentives to certain entities to provide reinsurance to stabilize individual market insurance premiums
- Reduce the cost of insurance for individuals with high rates of utilization of health services (measured by cost)
- Encourage greater participation in the individual and small group markets and increase the availability of health insurance options
- Promote access to preventive services
- Make payments directly or indirectly to healthcare providers for the provision of health services “specified by the Administrator”
- Provide assistance to reduce out-of-pocket expenditures, including copayments, coinsurance, premiums, and deductibles for individuals enrolled in health insurance coverage in the state
Failure by a state to take advantage of this funding would allow the Centers for Medicare & Medicaid Services to direct these funds toward stabilizing patient premiums in the state.
By far the most sweeping changes involve the Medicaid program. The ACA expanded Medicaid coverage to individuals who were previously ineligible for coverage under the program, and this led to the largest expansion of Medicaid in decades. The controversy regarding expansion also caused significant consternation resulting in the NFIB v. Sebeliuscase. The AHCA repeals Medicaid expansion, but not until 2020, and would codify expansion as an option, presumably through 2020 when it phases out. The enhanced federal funding associated with a state’s Medicaid expansion population would also end in 2020. Non-expansion states would be permitted to expand their Medicaid program prior to 2020 with the same enhanced funds, but the mandatory income eligibility threshold for children, ages 6-19, would be reduced from 133 percent to 100 percent as of 2020. The Children’s Health Insurance Program (CHIP) would be expected to pick up coverage for these children.
A per capita cap would be instituted beginning October 1, 2018. This would be a single cap made up of several buckets of enrollee populations whose per capita allotments would be calculated based on the state’s fiscal year 2016 Medicaid expenditures, multiplied by the number of enrollees in each category, and trended forward using a medical Consumer Price Index (CPI). The enrollee categories include the elderly, children, the blind and disabled, expansion adults, and non-elderly/non-disabled adults. Disproportionate share hospital supplemental payments, safety net payments for non-expansion states, 1115 waiver spending for delivery reform and uncompensated care pools, Medicare cost sharing for dual eligibles, and administrative costs would all be excluded from the per capita cap calculation.
What is most perplexing about the AHCA is the lack of flexibility provided to the states. The AHCA does not appear to authorize the states to expand the enrollee populations to which they could apply the per capita caps, nor does it allow for the states to adjust for the expansion population once the enhanced match decreases. As a result, the AHCA’s Medicaid provisions appear to be a huge cost shift from the federal government to the states, one that offers little in the way of flexibility for states to manage the imposed costs associated with a federal restructuring of the Medicaid program.