SENATE RELEASES DRAFT ACA REPLACEMENT BILL

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1 HIGHLIGHTS Senate Republicans released their ACA replacement legislatin, called the Better Care Recnciliatin Act. The Senate bill clsely mirrrs the Huse prpsal the American Health Care Act including by: Enhancing HSAs; Repealing the emplyer and individual mandates; and Preserving sme ACA prtectins. IMPORTANT DATES June 22, 2017 Senate Republicans issued their wn draft ACA repeal and replacement bill. July 4, 2017 Senate Republicans were pushing fr a vte befre the July 4 recess, but have indicated that they need mre time. SENATE RELEASES DRAFT ACA REPLACEMENT BILL OVERVIEW On June 22, 2017, Republicans in the U.S. Senate released a draft f their prpsal t repeal and replace the Affrdable Care Act (ACA), called the Better Care Recnciliatin Act (BCRA). The Senate bill clsely mirrrs the prpsal passed in the Huse f Representatives the American Health Care Act (AHCA) with sme differences. Fr example, unlike the AHCA, the BCRA: Wuld enhance the ACA s Sectin 1332 State Innvatin Waiver prgram; and Wuld nt allw issuers t impse a surcharge fr individuals wh d nt maintain cntinuus cverage. IMPACT ON EMPLOYERS The Senate has nt vted n any ACA repeal r replacement prpsal at this time. The prpsal wuld need a simple majrity vte in the Senate t pass. Hwever, amendments may be made befre a Senate vte is taken. Republicans were pushing fr a vte prir t the Senate s July 4 recess, but have nw indicated that they need mre time. If the BCRA passes the Senate, it wuld need t g back t the Huse fr apprval befre being signed int law by President Dnald Trump. Prvided By: ABC Insurance Trust

2 Legislative Prcess On May 4, 2017, the U.S. Huse f Representatives vted t pass the AHCA, which is their prpsal t repeal and replace the ACA. As a result, the AHCA mved n t the Senate fr cnsideratin. In respnse, the Senate drafted the BCRA as their wn ACA repeal and replacement bill. Because the Senate versin differs frm the Huse versin, the prpsal, if passed by the Senate, wuld need t be apprved by the Huse befre mving n t the president t be signed int law. Bth the Huse and Senate s prpsed ACA repeal and replacement legislatin are budget recnciliatin bills, which mean that they can nly address ACA prvisins that directly relate t budgetary issues specifically, federal spending and taxatin. As a result, these prpsals cannt fully repeal the ACA. Budget recnciliatin legislatin can be passed by bth huses with a simple majrity vte. Hwever, a full repeal f the ACA must be intrduced as a separate bill that wuld require 60 vtes in the Senate t pass. ACA Prvisins Nt Impacted Like the AHCA, the BCRA wuld nt affect the majrity f the ACA. Fr example, the fllwing key ACA prvisins wuld remain in place: Cst-sharing limits n essential health benefits (EHBs) fr nn-grandfathered plans (currently $7,150 fr self-nly cverage and $14,300 fr family cverage) Prhibitin n lifetime and annual limits fr EHBs Requirements t cver pre-existing cnditins Cverage fr adult children up t age 26 Guaranteed availability and renewability f cverage Nndiscriminatin rules (n the basis f race, natinality, disability, age r sex) Prhibitin n health status underwriting Similarly, the requirement t ffer the EHB package fr individual and small grup plans als remains in place. In additin, age rating restrictins wuld als cntinue t apply, with the age rati limit being revised t 5:1 (instead f 3:1), and states wuld be allwed t set their wn limits. Repealing the Emplyer and Individual Mandates The ACA impses bth an emplyer and individual mandate. Like the AHCA, the BCRA wuld reduce the penalties impsed under these prvisins t zer, effectively repealing bth mandates (althugh they wuld technically still exist). These changes wuld apply retractively fr mnths beginning after Dec. 31,

3 The AHCA wuld have allwed issuers t add a 30 percent late-enrllment surcharge t the premium fr applicants that had a lapse in cverage, in an effrt t limit adverse selectin and encurage individuals t maintain health cverage. Hwever, the BCRA remved this late-enrllment surcharge, s that issuers may nt charge higher premiums fr individuals wh d nt maintain cntinuus cverage. Nte that neither the AHCA nr the BCRA wuld repeal the ACA s reprting requirements related t the emplyer and individual mandates (Sectin 6055 and Sectin 6056 reprting). Replacing Health Insurance Subsidies with Tax Credits The ACA currently ffers federal subsidies in the frm f premium tax credits and cst-sharing reductins t certain lw-incme individuals wh purchase cverage thrugh the Exchanges. Like the AHCA, the BCRA wuld repeal the cst-sharing reductins, effective in The BCRA wuld, hwever, technically leave the premium tax credit prvisin in place, with heavy amendments taking effect in These amendments wuld essentially replace the ACA s premium tax credits with a prtable, mnthly tax credit t all individuals that can be used t purchase individual health insurance cverage. The BCRA wuld: Restrict individual eligibility fr premium tax credits t thse with incmes nt exceeding 350 percent f the federal pverty level (reduced frm the current eligibility limit f 400 percent); Eliminate the cap n repaying Exchange subsidy verpayments; and Amend the applicable percentage schedule fr determining the amunt f premium tax credits an individual is eligible fr, s that yunger individuals wuld be eligible fr higher tax credits. The BCRA (like the AHCA) wuld als repeal the ACA s small business tax credit, beginning in In additin, between 2018 and 2020, the small business tax credit generally wuld nt be available with respect t a qualified health plan that prvides cverage relating t elective abrtins. State Waivers The AHCA included an ptin fr states t btain limited waivers frm certain ACA standards, in an effrt t lwer premiums and expand the number f insured. Specifically, states culd apply fr waivers frm the EHB requirement and cmmunity rating rules (except strict limitatins applied with respect t rating based n gender, age and health status). The BCRA eliminated this state waiver ptin. Hwever, the BCRA wuld prvide states additinal flexibility t use waivers that currently exist under Sectin 1332 f the ACA. The ACA s Sectin 1332 State Innvatin Waivers are intended t allw states t pursue innvative strategies fr prviding their residents with access t high quality, affrdable health insurance while retaining the basic prtectins f the ACA. Currently, fur states have submitted applicatins fr Sectin 1332 Waivers (Alaska, Hawaii, Vermnt and Iwa; Califrnia submitted an applicatin, but later withdrew it). The BCRA wuld expand the ACA prvisins that culd be waived under Sectin 1332, and lwer the standards that states must meet in rder t be eligible fr a Sectin 1332 Waiver. In additin, the BCRA wuld als allw 3

4 the Department f Health and Human Services (HHS) t fast-track waiver applicatins frm states experiencing an urgent r emergency situatin with respect t health insurance cverage within the state. State Stability Fund The AHCA wuld have established a Patient and State Stability Fund fr 2018 thrugh 2023 t prvide funding t states that have applied fr, and been granted, a state waiver frm the ACA s cmmunity rating rules. Because the state waivers wuld nt be available under the Senate prpsal, the BCRA decreases the amunt available thrugh this fund, t be used t help address cverage and access disruptin. In additin, the BCRA wuld establish a secnd lng-term state innvatin fund that wuld dedicate $62 billin ver eight years t encurage states t assist high-cst and lw-incme individuals t purchase health insurance by making it mre affrdable. In 2018, the BCRA wuld als prvide $2 billin in state grants fr substance abuse disrder treatment r recvery supprt services fr individuals with mental health r substance use disrders t address the piid crisis. Enhancements t Health Savings Accunts (HSAs) HSAs are tax-advantaged savings accunts that are tied t a high deductible health plan (HDHP), which can be used t pay fr certain medical expenses. T incentivize use f HSAs, the BCRA (like the AHCA) wuld: Increase the maximum HSA cntributin limit: The HSA cntributin limit fr 2017 is $3,400 fr selfnly cverage and $6,750 fr family cverage. Beginning in 2018, the BCRA wuld allw HSA cntributins up t the maximum ut-f-pcket limits allwed by law (at least $6,550 fr self-nly cverage and $13,100 fr family cverage). Allw bth spuses t make catch-up cntributins t the same HSA: The BCRA wuld allw bth spuses f a married cuple t make catch-up cntributins t ne HSA, beginning in 2018, if bth spuses are eligible fr catch-up cntributins and either has family cverage. Address expenses incurred prir t establishment f an HSA: Under the BCRA, starting in 2018, if an HSA is established within 60 days after an individual s HDHP cverage begins, the HSA funds wuld be able t be used t pay fr expenses incurred starting n the date the HDHP cverage began. Relief frm ACA Tax Changes Like the AHCA, the BCRA wuld prvide relief frm many f the ACA s tax prvisins. The affected tax prvisins include the fllwing: Cadillac tax: The ACA impses a 40 percent excise tax n high cst emplyer-spnsred health cverage, effective in Like the AHCA, the BCRA wuld delay the effective date f the Cadillac tax t

5 Restrictins n using HSAs fr ver-the-cunter (OTC) medicatins: The ACA prhibits taxpayers frm using certain tax-advantaged HSAs t help pay fr OTC medicatins. Like the AHCA, the BCRA wuld allw these accunts t be used fr OTC purchases, beginning in Increased tax n withdrawals frm HSAs: Distributins frm an HSA (r Archer medical savings accunt) that are nt used fr qualified medical expenses are includible in incme and are generally subject t an additinal tax. The ACA increased the tax rate n these distributins t 20 percent. Like the AHCA, the BCRA wuld lwer the rate t pre-aca percentages, beginning with distributins in Health flexible spending accunt (FSA) limit: The ACA limits the amunt an individual may cntribute t a health FSA t $2,500 (as adjusted each year). Like the AHCA, the BCRA wuld repeal the limitatin n health FSA cntributins fr taxable years beginning in Additinal Medicare tax: The ACA increased the Medicare tax rate fr high-incme individuals, requiring an additinal 0.9 percent f wages, cmpensatin and self-emplyment incme ver certain threshlds t be withheld. Like the AHCA, the BCRA wuld repeal this additinal Medicare tax beginning in Deductin limitatin fr Medicare Part D subsidy: The ACA eliminated the ability fr emplyers receiving the retiree drug subsidy t take a tax deductin n the value f this subsidy. Like the AHCA, the BCRA wuld repeal this ACA change and reinstate the business-expense deductin fr retiree prescriptin drug csts withut reductin by the amunt f any federal subsidy, effective in Beginning in 2018, bth the AHCA and the BCRA wuld als repeal the medical devices excise tax, the health insurance prviders fee and the fee n certain brand pharmaceutical manufacturers. The 10 percent sales tax n indr tanning services wuld be repealed effective Oct. 1, 2017, t reflect the quarterly nature f this cllected tax. Finally, the BCRA wuld als reduce the medical expense deductin incme threshld t 7.5 percent, beginning in Mdernize Medicaid Mst f the differences between the AHCA and the BCRA relate t the Medicaid prgram. Like the AHCA, the BCRA wuld repeal the ACA s Medicaid expansin, and make certain ther changes aimed at mdernizing and strengthening the Medicaid prgram. Fr example, the BCRA wuld prvide enhanced federal payments t states that already expanded their Medicaid prgrams, and then transitin Medicaid s financing t a per capita alltment mdel starting in 2021, where per-enrllee limits wuld be impsed n federal payments t states. Unlike the AHCA, thugh, the BCRA wuld als guarantee cverage fr children with medically cmplex disabilities and ease restrictins n cverage f treatment fr mental diseases in psychiatric hspitals. 5