Policy Brief: American Health Care Act (AHCA)
On May 4th, six weeks after the bill was abruptly pulled from the House floor prior to a vote, the House passed the American Health Care Act of 2017 (AHCA), H.R. 1628, in a vote of 217-213 (one vote over the majority threshold). The bill which passed the House has not yet been scored by the Congressional Budget Office (CBO) and passed with only three hours of final debate. (Earlier versions of the bill were debated more extensively in March and a score released by the CBO on March 13 projected the bill would reduce federal deficits by $337 billion over the 2017-2026 period, but also result in an estimated 24 million more uninsured individuals by 2026 than under current law.) The legislation will now go to the Senate for consideration. If changes to the bill are made in the Senate, which is likely, the legislation will go back to the House for further consideration.
If enacted, the AHCA would repeal and replace a number of key provisions of the Patient Protection and Affordable Care Act of 2010 (ACA). With respect to the individual and small group markets, for example, the bill would eliminate the individual mandate, create new continuous coverage requirements, and increase age rating ratios from 1 to 3 to 1 to 5, allowing states to go higher by waiver. It would also make modifications to the ACA premium tax credits for 2018-2019, replace the ACA’s tax credits with a new, flat age-based tax credit for individual insurance coverage beginning in 2020, and eliminate cost sharing subsidies effective in 2020.
With respect to Medicaid, the bill would make significant changes, converting it to a per capita cap program in 2020 (and giving states the option to block-grant Medicaid entirely).
In addition, the House-passed bill would impact employers, in particular, in the areas highlighted below:
- Eliminates employer mandate penalties, effective immediately (retroactive to 2016)
- Requires employers, at the request of any employee, to provide a statement to the employee regarding the employee’s eligibility for employer coverage
- Includes new requirements regarding issuance of returns and statements related to insurance offerings
Essential Health Benefits
- Allows states beginning in 2020 to apply for waivers to redefine the state’s essential health benefits (EHB). (Notably, depending on the extent to which states take up this option, this could potentially impact not only the individual and small group markets, but large employers, as well, with respect to lifetime and annual dollar limits and caps on enrollee annual out of pocket spending)
- Repeals many of the ACA taxes, and further delays implementation of the “Cadillac tax” on high-cost employer-sponsored group health plans through 2025
Health Savings Accounts
- Encourages use of Health Savings Accounts (HSAs) and flexible spending accounts (FSAs), for example, by repealing the ACA’s annual limitations on contributions to FSAs and repealing the ACA increase of tax on distributions from HSAs that are not used for qualified medical expenses
Despite these major changes, numerous other provisions of the ACA would remain in place under the bill. For example, the Summary of Benefits and Coverage (SBC) requirements would remain unchanged. The legislation also does not make changes to the tax exclusion for employer sponsored health insurance.
As noted above, the bill will be considered by the Senate next where it may undergo further changes. The level of support the bill receives will be impacted by the CBO updated score of the current bill, which is anticipated to be released in the near future.
DirectPath will continue to follow developments related to AHCA and will keep you updated.