On Thursday, June 22, 2017, Senate Republican leaders released their legislative proposal to amend the Affordable Care Act (ACA). A revised version of the bill was released on June 26. The Senate’s take on healthcare legislation, titled the Better Care Reconciliation Act of 2017 (BCRA), comes after the House passed the American Health Care Act (AHCA) by a narrow margin in early May. The Senate bill is structurally similar to the House version, but it departs from the AHCA in important ways. The Senate bill makes deeper cuts to Medicaid and establishes a different set of subsidies to help individuals purchase insurance. The BCRA is labeled a “discussion draft,” but Senate leaders have set an ambitious goal of holding a vote on the measure before the July 4th holiday.
Key provisions of the BCRA are outlined below.
Individual Mandate Repeal
The ACA requires individuals to purchase insurance or pay a tax penalty. The AHCA eliminates the tax penalty for failing to carry insurance and provides that individuals who have a gap in coverage of 63 days or longer could be assessed a 30% premium surcharge when they purchase insurance after such a gap. The Senate bill eliminates the tax penalty for failing to carry insurance and instead imposes a six-month waiting period for people who have a break in coverage of 63 days or longer.
Employer Mandate Repeal
The ACA requires employers with at least 50 employees to provide insurance to their employees or face a penalty. Both the House and Senate bills would eliminate this requirement.
Subsidies to Purchase Insurance
The ACA uses a system of income-based subsidies to provide financial support for individuals to purchase health insurance. The AHCA eliminates these subsidies and instead offers individuals a set of age-based tax credits to help them purchase insurance. The credits start at $2,000 for individuals under 30 and go as high as $4,000 for individuals age 60 and over.
The Senate’s BCRA provides tax credits based on age, income, and geography, but the resulting subsidies are less generous than those offered under the ACA, because they are designed to assist with the purchase of a basic, bare-bones plan.
Both the House and Senate bills allow states to obtain waivers of key provisions of the ACA. The ACA imposes a maximum ratio of 3 to 1 between the costs charged to the oldest customers and those charged to the youngest. Both the AHCA and BCRA raise that ratio to 5 to 1.
The ACA requires insurers to offer policies without basing their cost on the health status of individuals buying the policies. The AHCA breaks with this requirement. If certain conditions are met, individuals can be charged more for insurance policies based on health status. The conditions specified in the AHCA require the state to put in place a program that establishes high-risk pools or reinsurance programs or participate in the federal invisible risk-sharing program to help cover high-cost consumers. The AHCA sets aside more than $100 billion in federal funds to support such programs. The BCRA released by the Senate, on the other hand, does not allow for pricing based on health status.
Both the House and Senate bills allow states to obtain waivers of the federal essential health benefits requirements. These requirements mandate that health policies cover specified benefit categories such as prescription drugs, maternity care, and mental health. A state that obtains a waiver of these requirements could permit insurers to offer slimmed-down, potentially less expensive policies that do not cover these categories of benefits.
The House and Senate bills repeal or delay implementation of most of the taxes imposed by the ACA to fund the expansion of health coverage. Both bills repeal the tax imposed by the ACA on pharmaceutical manufacturers and the ACA excise tax on medical devices. The Senate bill delays implementation of the 40% tax on high-cost employer-sponsored group health plans known as the “Cadillac Tax” until 2026.
The ACA increased access to health coverage by expanding the Medicaid program and providing enhanced federal funding to cover newly eligible individuals. Both the House and Senate bills roll back the Medicaid expansion and make further cuts to the safety net program by changing the way it is funded going forward.
Both proposed bills shift Medicaid from an open-ended entitlement to a program on a fixed budget that comes in the form of either a block grant to the states or a per capita amount for each beneficiary. The Senate bill sets the amount of these funds with a formula that grows more slowly than the one put in place under the AHCA. The result is substantial financial cuts to the Medicaid program.
Coverage for Young Adults on Parents’ Policies
Both the House and Senate bills maintain the popular ACA provision requiring insurers to provide dependent coverage for children up to age 26.
The BCRA will now be considered by the full Senate, where it faces an uncertain path forward. Compounding the uncertainty is an analysis by the Congressional Budget Office released Monday, June 26, which predicts that enactment of the BCRA would (i) increase the number of uninsured Americans by 22 million; (ii) cut $772 billion from Medicaid; and (iii) result in a $321 billion deficit reduction by 2026, as compared to the ACA.
If the Senate approves the bill, leaders from both the House and Senate will need to iron out the differences between the versions of the legislation advanced by the two chambers. Venable’s healthcare and life sciences regulatory team will continue to closely monitor the BCRA and other health law and policy developments. Look for further updates from Venable and do not hesitate to contact the Venable attorneys listed here with any questions concerning this or other healthcare matters.