Employee Benefits Compliance

Senate Finally Unveils GOP Healthcare Reform Bill

us capitol

Senate Majority Leader Mitch McConnell finally unveiled the Senate GOP healthcare reform bill today (June 22nd), after weeks of  drafting the bill behind-closed-doors with a select committee of Republican men.  The 147-page bill — officially titled  the “Better Care Reconciliation Act of 2017” — is called a “discussion draft” to indicate that it is a starting point which may be amended before it is voted on.  McConnell is urging the Senate to vote on the bill next week, before the end of June.  This is a very short timeframe to debate, possibly amend and vote on the bill.  The Republicans need at least 51 votes to pass the bill;  with 52 Republicans in the Senate, they can’t afford to lose more than two Republican votes.  (Vice President Pence would be the 51st Yes vote in the even of a tie.)

The Senate bill is much like the May 4th House version but there are some significant differences.   The similarities are that the Senate bill:

  • repeals the individual mandate and the employer mandate (actually, reduces the penalty to zero)
  • significantly cuts back federal funding for Medicaid,
  • eliminates most of the Obamacare taxes after 2017  (and delays the effective date of the Cadillac tax until 2025)
  • includes the same H.S.A. provisions as in the House bill (e.g., increased annual contribution to be equal to out of pocket limits, and allows spousal  contributions to same H.S.A. even if spouse is not in own HDHP).

The significant differences are that the bill:

  • Prohibits insurers from charging higher premiums for individuals with preexisting conditions.
  • Allows small businesses and individuals to establish association  health plans to buy insurance.
  • Increases the tax credits and subsidies in the House bill, to help consumers pay for individual coverage.

Details on Some of the Major Provisions in the Bill

  • Preexisting conditions:  Prohibits insurers from increasing premiums for people with pre-existing conditions, but allows insurers to impose a 6-month waiting period if an individual has a coverage beak more than 63 days and then applies for an individual health insurance policy.  (Not applicable for newborns and adopted children under age 18.) The House bill allows states to obtain waivers and allow insurers to increase premiums for individuals who allow their coverage to lapse for more than 63 days and then apply to buy individual insurance policies.
  • Association Plans.  Allows small businesses and individuals to establish association health plans that will be treated like large group plans for certain purposes, such as exemption from the community rating and essential benefit requirements that are currently imposed on small group and individual plans.
  • Medicaid expansion:  Continues enhanced expansion funding until 2021 and then phases it out over three years. The House bill would eliminate enhanced funding for new enrollees as of 2020.
  • Medicaid funding:   Adopts the House plan to pay a fixed amount of federal Medicaid funds to states each year  based on enrollment or as a lump sum block grant.  However, the amount paid over time would be reduced because as of 2025 the annual growth rate of federal Medicaid funds would be tied to overall inflation rather than to medical inflation, which is higher.  To deal with the lower funding levels, states probably would have to cut enrollment, benefits or provider payments.  (In contrast, under Obamacare the amount of federal funding for Medicaid varies based on the services provided;  it is not a fixed amount.)
  • Premium subsidies:  Continues but modifies the Obamacare premium subsidies framework:  Ties credits to age bands (5) but as of 2020, subsidies would be available only to people earning up to 350% of the federal poverty level.  (Not up to 400% as under Obamacare.)  Also, people with access to employer coverage are not eligible for subsidies, even if the employer coverage is not “affordable.” On the other end of the economic scale, the Senate bill also would loosen eligibility criteria by making subsidies available to people with incomes below the poverty level.  This would help residents of (Republican) states that didn’t expand Medicaid.  Currently in those states, people who earn less than 100% of the FPL but more than the state Medicaid threshold (often 25-40% of the FPL) are ineligible for subsidies or for Medicaid.
  • Cost-sharing subsidies:   Allocates funds to pay for the cost-sharing subsidies until 2019, for low-income people who buy individual policies on the Health Insurance Marketplace.  This  is an attempt to keep the Marketplaces from collapsing, because in many markets insurers are dropping out or substantially raising premiums for 2018 because of uncertainty as to whether the  current administration will continue to fund these subsidies.
  • Essential Health Benefits:  Uses existing ACA waivers, rather than House new waivers, to allow states to define essential health benefits (EHBs).  This could allow states to not mandate that insurers cover maternity care, mental health and other services that are currently included as EHBs.
  • Other:  Defunds Planned Parenthood for a year. Eliminates Medical Loss Ratio (MLR) rebates after next year but requires each state to establish its own MLR rebate requirements. Eliminates small business tax credits after 2019 and makes small business health plans ineligible for the tax credit if they cover abortion services.

Congressional Budget Office Score and Budget Reconciliation Requirements

The Congressional Budget Office (CBO) “score” of the bill is expected early next week. The CBO score estimates the overall cost of the bill and of specific provisions in it and the number of people projected to have and lose health insurance.  The CBO score of the House version estimated that 23 million fewer people would be insured by 2026 than under current law (Obamacare).    Also, the Senate parliamentarian will have to decide whether certain provisions currently in the bill will have to be removed to comply with the budget reconciliation  requirements.   For example, the provision to defund Planned Parenthood might have to be taken out.