The ACA has passed the House and is now on to the Senate. Passing through the House is just the first step in this process and as more information becomes available we will pass it along.
For in depth details of the recent House decision please read the NAIFA update below.
Issue: Health Reform
Date: May 5, 2017
Action Taken: On May 4, the House passed H.R. 1628 by a vote of 217-213 using a filibuster-proof reconciliation structure. The American Health Care Act (AHCA) now goes to the Senate where it is virtually certain to change significantly.
Coverage Requirement and Credits: The AHCA would functionally, although not actually, repeal the individual and employer mandates by zeroing out the penalties attached to failure to comply with them. A continuous coverage incentive provides a 12-month lookback period designed to limit adverse selection in the individual markets. An applicant with a 63 day or greater lapse in coverage will be assessed a 30 percent late-enrollment surcharge for 12 months.
It also would repeal the ACA’s minimum essential benefits rules for health insurance purchased using the bill’s tax credits, and would permit tax credits for “catastrophic” and some off-exchange products. The bill replaces the ACA tax subsidy and replaces it with an advanceable, refundable tax credit for the purchase of state-approved, major medical health insurance. The bill’s age-based tax credits are also income-limited.
Taxes: It would repeal nearly all of the ACA's tax provisions, including the 3.8 percent investment tax assessed on wealthier taxpayers. The Cadillac tax and the Medicare (HI) tax are the two exceptions. The 40% excise (Cadillac) tax will apply for taxable periods beginning after 2025. The 0.9 percent Medicare surtax on high-income individuals that will remain until 2022.
HSAs and FSAs: The AHCA would repeal the ACA imposed $2,500 limit on contributions to a health Flexible Spending Account (FSA). It would also expand health savings account (HSA) rules to allow contributions to HSAs equal to the total of the high deductible health policy (HDHP) co-pays and deductibles. And, allows both spouses to make catch-up contribution to one HSA.
Market Reforms: The AHCA maintains the ACA’s insurance market reforms, including the ban on use of preexisting conditions, the ban on annual and lifetime benefit limits, and the provision requiring insurers to allow coverage of adult children (to age 26) on their parents’ policies. It changes the age-based premium bands to allow an insurer to charge older Americans up to five times (up from the ACA’s three times) the premium they charge younger insurance purchasers, and gives States the flexibility to set their own ratio.
As passed by the House, the AHCA included several amendments put together in an effort to cobble together the Republican votes needed in the House to pass the bill. Among them is a provision that allows states to seek a waiver from the ACA’s community rating and minimum essential benefits rules. The waiver would be available if the state seeking it certifies to the Department of Health and Human Services (HHS) that the state has in place rules that reduce the cost of health insurance and also provide access to coverage, including to those with pre-existing conditions. Approval of those waivers would be automatic, within 60 days, unless HHS responds to the State’s request for a waiver with an explanation for why it would be denied.
Most lawmakers think States seeking a waiver would likely create a high-risk pool and use the federal money to subsidize premium payments. Concerns regarding the the ability of the rule to provide affordable coverage for those with preexisting conditions was the lightning rod issue that made the AHCA so controversial in the House. It is likely to be a significant issue in the Senate, too.
H.R.1628 also cuts funding for Medicaid, but states are given the choice between the bill’s per capita funding formula or a block grant. The AHCA would also freeze the ACA’s Medicaid expansion rules. The bill also includes funding for state “stability funds” that states could use to help lower-income and/or higher-risk individuals get health insurance.
Medical Loss Ratio: The bill does not change the rules that require insurers to rebate premiums when the companies do not spend at least 80 or 85 percent of their premium income on medical expenses. That means there is no change to the medical loss ratio (MLR) rules that have such an adverse impact on agent commissions. However, this issue can be addressed through changes to federal regulation, and NAIFA will continue to request that HHS exclude agent commissions from the MLR calculation.
Prospects: Enactment of ACA repeal-and-replace is a top priority for both Congress and the Administration, but how to replace the ACA remains a deeply dividing issue for Congressional Republicans. Those difficult issues now take center stage in the Senate, where acceptance of the House bill seems unlikely. However, negotiations are ongoing. Timing is uncertain, but it is likely the Senate will not be ready to act on H.R.1628 (or its substitute) until June at the soonest.
© 2017 LRA Insurance