June 27, 2017
By Eric Crowder*
On June 22, Senate Republicans unveiled the Better Care Reconciliation Act of 2017 (BCRA), a 142-page bill proposing their version of the repeal of the Affordable Care Act (ACA). While the June 22 release of the BCRA was intended to provide the time necessary to bring the bill to a vote before the Senate leadership's self-imposed July 4 recess deadline, the BCRA was amended on Monday, June 26. As Senators from both sides of the aisle continue to join media outlets and trade associations in reacting to the merits of the BCRA, subsequent updates could make a vote by Independence Day less likely. While this dynamic process continues to shape the BCRA, this alert outlines several of the bill's key provisions as they stand on Monday, June 26, 2017.
The vote has reportedly been delayed until after the Senate’s July recess.
Insurance Coverage Provisions
The BCRA repeals the ACA's individual mandate, which requires most Americans to have health coverage or pay a penalty to the Internal Revenue Service. Unlike the American Health Care Act (AHCA) bill previously passed by the House of Representatives, the BCRA does not authorize insurers to impose a 30% premium surcharge on individuals who purchase a health insurance plan on the individual market after letting their previous coverage lapse. However, through an update to the BCRA announced on Monday, June 26, the BCRA bars an individual from purchasing health insurance on the individual health insurance market for six months if the individual allows his or her health insurance coverage to lapse for more than 63 days.
The BCRA mirrors how the AHCA addresses (1) the employer mandate, which requires sufficiently-sized companies to offer affordable health care insurance to their employees, and (2) the eligibility of young adults to remain covered by their parents’ health insurance plan until they turn 26 years old. Regarding the employer mandate, the BCRA eliminates any federal-level obligation for companies to offer health coverage to its employees. On the other hand, the BCRA will continue to allow young adults under the age of 26 to remain on their parents' health insurance plans.
Financing of Health Insurance in the Individual Market
The federal subsidies created by the ACA change under the BCRA. The tax credits created by the ACA for health insurance plans purchased on the individual market are primarily based on age, income, and geography. The BCRA lowers the maximum income limit (a decrease from 400% to 350% of the federal poverty level) for eligibility to receive the tax credits. The cost sharing reduction subsidies paid under the ACA to insurers to subsidize the decreased deductibles and co-payments for some qualified health insurance consumers will cease in 2020. The BCRA prohibits health insurance companies from denying coverage and increasing a consumer's premium based on a preexisting condition, but the state-level insurance commissioners may allow health insurance companies to carve-out health care costs associated with certain conditions. To protect health insurance companies that incur heavy losses from the requirement to cover preexisting conditions, the BCRA creates a "Patient and State Stability Fund" of $112 billion over ten years. Finally, the BCRA authorizes health insurance companies to charge older individuals ages 59-64 up to five times as much as younger individuals for insurance premiums—an increase from the 3:1 limit imposed by the ACA.
The BCRA adopts the approach taken by the House-passed AHCA by repealing, effective 2020, the cost-sharing subsidy program included in the ACA that is at issue in House v. Price. In Price, the U.S. House of Representatives asserted that the Obama administration exceeded its constitutional authority by executing this program without a corresponding appropriation from Congress. If ACA repeal legislation is ultimately passed including this language ending the subsidy program, the D.C. Circuit is likely to dismiss Price for mootness.
Changes to the Medicaid Program
The Medicaid program is fundamentally changed under the BCRA from an entitlement program with the federal government matching state funds based on each state's Federal Medical Assistance Percentage to a block grant program beginning in 2021. States are authorized to institute another fundamental change by adding a work requirement as part of Medicaid eligibility for non-disabled, non-elderly, and non-pregnant individuals, i.e., able-bodied adults. Under the ACA, states were able to expand Medicaid eligibility criteria to cover all individuals earning an annual income less than 138% of the federal poverty level, with the federal government financing the costs of that increased eligibility. Under the BCRA, the federal government will pay a smaller portion of those costs beginning in 2021 to the 32 states that expanded Medicaid. The BCRA will affect the reimbursement rates for Medicaid providers by restoring the disproportionate share hospital payments made to provider hospitals in states that expanded their Medicaid program under the ACA. Further, provider hospitals in states that did not expand their Medicaid program would get an increased allotment of disproportionate share hospital payments.
Other Elements of the BCRA
- The BCRA eliminates most of the taxes created by the ACA such as the taxes on investment income, wages above $200,000 for an individual ($250,000 for a household), medical devices, prescription drugs, and indoor tanning facilities.
- For individuals contributing to a health savings account, the maximum amount they can contribute increases from the current $3,400 per individual per year and $6,750 per family per year to maximum amounts of $6,650 and $13,300, respectively, starting in 2018 (dependent on the annual deductible and out-of-pocket expenses offered under the affiliated high-deductible health plan).
- States are authorized to amend the definition of what is enumerated as an "essential health benefit" requiring coverage under health insurance plans.
- States are authorized to allow health insurance companies within their respective state to eliminate the annual and/or lifetime maximum limits paid for essential health benefits offered to individuals.
- States will also have more latitude when applying for a Section 1332 State Innovation Waiver that allows a successful state applicant to provide alternative means of offering health insurance to its residents.
- Finally, the BCRA imposes a one-year moratorium on Medicaid payments to Planned Parenthood Federation of America, Inc. and its subsidiaries.
As the particular provisions of the BCRA continue to evolve, the initial Congressional Budget Office (CBO) cost estimate of the BCRA (released on Monday, June 26) will likely be at the center of most debates. According to the CBO cost estimate, the BCRA will increase the number of uninsured Americans by 22 million in 2026 relative to the number of uninsured Americans under current law. The CBO further estimates that the BCRA will reduce the cumulative federal deficit over the 2017-2026 period by $321 billion ($202 billion more than the estimated net savings under the AHCA). As the particulars of the proposed bill are subject to change before it is ultimately subjected to a vote on the Senate floor, so too are the CBO cost estimates.
*We would like to thank Eric J. Crowder, JD (Hall Render Killian Heath & Lyman PC, Annapolis, MD) and Jane Sitorius, JD/MHA (YMCA of the USA, Chicago, IL) for respectively authoring and reviewing this Alert.