The House Narrowly Passes AHCA

The content of this article was authored by the USI National Employee Benefits Compliance team.

On May 4, 2017, the House of Representatives passed an amended version of the American Health Care Act (AHCA) by a vote of 217 to 213. The AHCA, aimed at repealing and replacing the Affordable Care Act (ACA), was originally released by House Republicans on March 6th, but was pulled from the House floor on March 24th, due to a shortage of votes needed to pass the legislation.

In working with the conservative Freedom Caucus and wavering moderates, House Republicans made a number of amendments to the AHCA including the MacArthur Amendment and the Upton Amendment. The MacArthur Amendment allows states to apply for a waiver from certain ACA requirements, including essential health benefits, continuous coverage penalty and community rating rules. The Upton Amendment provides an additional $8 billion in funding for states that “opt-out” of the ACA’s continuous coverage provision (and opts for health status underwriting) to support individuals with health conditions.

While the AHCA, as amended and approved by the House, impacts a number of national health reform initiatives, employer-sponsored group health plans may be directly or indirectly impacted by the following provisions:

Individual and Employer Mandate. The bill eliminates the individual and employer mandate penalties effective after December 31, 2015.

Tax Credits. The bill replaces subsidies for individuals who purchase health insurance in the marketplace with refundable tax credits based on income.

Taxes in General. The legislation will repeal most of the taxes and fees contained in the ACA, including the additional Medicare tax and 3.8% tax on capital gains, dividend, and interest income on wages above $200,000, taxes on prescription drugs, and premium taxes on insurance carriers.

Cadillac Plan Tax. The bill further delays this excise tax on high cost plans, until 2026. Currently the Cadillac Plan Tax is scheduled to come into effect January 1, 2020.

Continuous Coverage Incentive. Beginning with the open enrollment period for calendar year 2019 (and special enrollment events in calendar year 2018), there will be a 12-month look-back period to determine if an applicant in the individual health insurance market went longer than 63 days without continuous health insurance coverage. If there is a lapse in coverage of more than 63 days, carriers will assess a flat 30% late enrollment surcharge on top of the base premium for a 12-month period.

Community Rating. The ACA prohibits insurers from charging older adults more than 3 times the amount charged to young adults for the same coverage. This bill increases that spread, allowing insurers to charge older adults 5 times as much as young adults for the same coverage.

State Waivers (Opt-out). The law permits states to apply for a waiver from certain federal health care reform requirements. Under a waiver a state may:

• Implement an age-rating ratio above the 5:1 ratio beginning in 2018.
• Define their own essential health benefits (a package not as robust as the federal requirements) after 2020. This may result in employers being allowed to impose annual and lifetime limits on some core benefits.[1]
• In the individual market, replace the late enrollment penalty (30% premium surcharge) with health status rating beginning in 2019 as long as the state operates a risk mitigation program (high risk pools) or participates in the (to be established) Federal Invisible Risk Sharing Program. The bill provides $130 billon to states over ten years for high risk insurance pools to cover the most expensive to insure. The Upton Amendment adds an additional $8 billion to assist people with pre-existing conditions. Health status rating cannot be waived for individuals who maintain continuous coverage.

HSA Changes. The bill would relax certain HSA rules specifically, increasing the maximum annual contribution to align with the maximum out-of-pocket limit for qualified HDHPs.

Medicaid. The ACA expanded Medicaid eligibility to include certain eligible adults with income below 133% of the Federal Poverty Level (FPL). The AHCA law rolls-back this expansion, and sunsets an ACA provision that would permit further expansion (to 138% of the FPL).

Next Steps for the bill

Now that the amended bill has passed the House, it will move to the Senate, where it faces an even tougher path given that Republicans only hold a 2-vote majority. Major revisions to the AHCA are expected in the Senate; some reports indicate that the Senate is working on its own healthcare bill.

The House voted on the revised bill without an updated accounting of its cost or impact from the Congressional Budget Office (CBO). In its original scoring of the AHCA, the CBO projected that the AHCA would reduce federal deficits by $337 billion over the next ten years, but approximately 24 million people currently insured by the ACA were projected to become uninsured over that same period of time. Senate rules require a CBO score for any bill passed through reconciliation and it is expected that the amended bill will be scored by the CBO in the coming weeks.

WHAT SHOULD EMPLOYERS DO?

For now, employers should continue to follow all requirements of the ACA. This new bill will need to be passed by the Senate and signed by the President before becoming law. Accordingly, there are many steps that would need to occur before the AHCA could replace the ACA as law of the land.

USI’s National Compliance Team will continue to monitor and report developments.

[1] Also, small insured plans and individual plans could exclude certain core benefits.

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