HOUSE REPUBLICANS PASS AMERICAN HEALTH CARE ACT; BILL HEADS TO SENATE FOR FURTHER CONSIDERATION

May 8, 2017

 

On Thursday, May 4, by a vote of 217 to 213 (with 20 Republicans voting against the bill), the U.S. House of Representatives passed an amended version of the American Health Care Act (AHCA), which repeals and replaces significant portions of the Affordable Care Act (ACA).

This bill comes several weeks after U.S. House of Representatives’ Speaker Paul Ryan pulled the AHCA from the floor once it was clear that, at that time, the bill was short on votes to pass. In large part, the original bill failed because the more conservative wing of the Republican Party, known as the Freedom Caucus, was against the bill because of its preservation of certain ACA provisions.

For employers, the most significant change the AHCA makes to the ACA is to repeal the employer mandate penalties effective January 1, 2016.  Other significant changes for employers are unlimited flexible spending accounts, and enhancements to health savings accounts (HSAs).  For individuals, the most significant changes include the repeal of the ACA’s Medicaid expansion and its premium subsidies and cost-sharing reductions for low-income individuals.  Higher-income individuals would see relief from various ACA taxes and fees, including the 0.9% Medicare surtax beginning in 2023 and the 3.8% net investment income tax retroactive to the beginning of this year.

The AHCA has been amended several times since its introduction.  There are two Manager’s amendments (containing Technical and Policy changes), the MacArthur amendment, and the Upton amendment.

The MacArthur amendment establishes a “Federal Invisible Risk-Sharing Program” and allows states to submit applications to the Secretary of Health and Human Services to modify certain ACA requirements, such as the essential health benefits standard and age rating restrictions. States would also be permitted to waive the AHCA’s 30 percent premium surcharge for individuals who seek to re-enroll after failing to maintain continuous coverage, defined as a lapse of 63 days or more over the previous 12 months; however, insurers would be able to underwrite based on health status when there has been such a lapse (generally for up to 12 months).  For employers, this may mean again having to issue certificates of creditable coverage.  The Upton amendment would add an additional $8 billion to state risk pools, which are intended to help individuals with pre-existing conditions obtain coverage in states where community rating is not mandatory.

There was also a companion bill (H.R. 2192) that passed the House along with the AHCA, which eliminates the waiver option in the MacArthur amendment for members of Congress.  The bill ensures that members of Congress and their staff are treated the same as other individuals in a state that receives a MacArthur amendment waiver.

Summary of Key Changes

The chart below summarizes some of the significant changes made by the AHCA.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

MacArthur Amendment

The following chart summarizes the changes made to the AHCA by the MacArthur amendment.

 

 

 

 

 

 

 

 

 

Limited Waiver Option

The limited waiver option in the MacArthur amendment was necessary to secure the votes of the Freedom Caucus.  It has been criticized as potentially allowing states to waive out of the prohibition on pre-existing condition exclusions by allowing underwriting based on health status for those who experience a gap in continuous coverage, which in effect temporarily raises the cost of coverage for individuals with pre-existing conditions.  It remains to be seen whether the AHCA’s high-risk pools and invisible risk-sharing program contain enough funding to offset these potential premium increases.

Next Steps

AHCA has yet to be scored by the Congressional Budget Office. It will now go to the Senate where significant changes are expected in order to secure passage (and it is possible that it may not garner enough votes there to pass at all).  In addition, it is not clear that as currently drafted it will meet the requirements to qualify for a simple majority vote under the Senate’s budget reconciliation rules.  Provisions that have no budgetary impact may be removed and AHCA’s tax policies may be required to have sunset dates so that they do not increase deficits outside of the budget window (typically, 10 years).  It may take months before any final legislation is passed and the AHCA may get stalled again as changes will have to go back to the House for approval.  Employers and other stakeholders should stay the course on ACA compliance at this time while they continue to monitor for changes as the AHCA continues to make its way through the legislative process.

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About The Authors.  This alert was prepared by Marathas Barrow Weatherhead Lent LLP, a national law firm with recognized experts on the Affordable Care Act.  Contact Peter Marathas or Stacy Barrow at pmarathas@marbarlaw.com or sbarrow@marbarlaw.com.

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