March 8,2016 House GOP Unveils ACA Replacement Bill After months of negotiations and on the heels of prior leaked drafts, House Republican leadership unveiled the American Health Care Act, their legislation to repeal and replace the Affordable Care Act. The first publicly released bill is broadly similar to earlier leaked drafts: ACA subsidies are replaced with age-based credits and Health Savings Accounts, federal Medicaid dollars are subject to caps after 2020, and most of the ACA s taxes and mandates are repealed. The bill also ends the Medicaid expansion by prohibiting new expansion enrollees after 2020; existing expansion enrollees can remain in the program until they lose eligibility. Most of the bill s provisions, including changes to credits and mandates, are phased in by 2020. The bill represents a first attempt at forging a conservative middle ground between the ACA and outright repeal, but various factions of the Republican congressional caucus have already indicated early opposition. Some provisions favored by conservative factions, such as the one-year freeze on funding for abortion providers such as Planned Parenthood, are anathema to moderate Republicans in the Senate. Conversely, moderate Republicans insist that tax credits for insurance must be included in the final bill, but conservatives such as Rand Paul decry the credits as Obamacare Lite. The 31 Medicaid expansion states (plus D.C.)...... continue to receive federal funds for existing expansion enrollees, but cannot enroll new expansion enrollees beginning in2020. The number of expansion enrollees will gradually shrink as existing enrollees lose eligibility for various reasons and are not replaced by newenrollees. The ACA s cuts to Disproportionate Share Hospital payments are reversed beginning in 2020. The 19 states that have not expanded Medicaid...... will be provided additional safety net funding that allows them to increase payments to Medicaid providers during the 2018-2022period. The bill appropriates $10 billion for this purpose, which would be evenly divided between the non-expansion states in proportion to the size of their population with incomes below 138 percent of the federal poverty level. The ACA s cuts to Disproportionate Share Hospital payments are reversed beginning in20 18.
Federal Support for Medicaid Capped after 2020 ENROLLED POPULATION DETERMINESCAP To determine the amount of funding states should receive in 2020 and beyond, the GOP bill first estimates the costs per enrollee category in 2016. Then, in 2019, these per-enrollee costs are adjusted by a index to create a cost per enrollee type. Starting in 2020, these amounts are multiplied by the number of enrollees currently enrolled in each state, plus any additional that has occurred since 2019. Each year these amounts are recalculated and the combined total sets a federal cap for each state. FEDERAL SHARE ISCAPPED As enrollees use services, the federal and state goverment would split costs based on the state s Federal Medical Assistance Percentage. However, once the federal government reaches the predefined cap, the state will be required to pay 100 percent of costs for the remainder of the fiscal year. elderly blind/disabled Elderly enrollee X + X Blind/disabled enrollee + -presentyear -presentyear Cumulative annual Medicaid spending STATE SHARE Cost perchild X Child enrollee + -presentyear CAPPED FEDERAL AMOUNT expansion Expansion enrollee X + -presentyear Beginning of year FEDERAL SHARE End of year other adult X Other adult enrollee + -presentyear
Continuous Coverage Requirement Would Replace Individual Mandate The bill repeals the ACA s individual mandate, which imposes a tax penalty on individuals who do not obtain health insurance. However, the bill does not repeal the ACA s protections for individuals with pre-existing conditions. To prevent individuals from simply waiting until they are sick to enroll in insurance, the AHCA institutes a continuous coverage requirement that allows insurers to impose a limited penalty on individuals who have allowed their insurance coverage to lapse for a substantial period. The CBO has not yet scored the bill to estimate its effects, but some health economists worry that younger, healthier enrollees will wait until they are sick to enroll in insurance, since the new penalty is relatively modest compared to the cost of several years of premium payments. This would raise the cost of insurance, since the risk pool of insured individuals would be older and sicker on average. How the continuous coverage requirement would work If coverage is continuously maintained through calendar year...... the individual can reenroll or enroll in a new plan at the standard price for nextyear. Individuals can freely enroll in insurance plans for 60 days following a qualifying life event, such as: Loss of existing insurance coverage Marriage or divorce Adoption or birth of a child Major change in place of residence or employment If there is a gap in coverage during the calendar year lasting at least 63 continuous days... +30% PENALTY... insurers are allowed to impose a 30 percent increase in premiums for one year.
ACA Subsidies Are Based on Income, Costs The Affordable Care Act s subsidies vary to account for differences in an enrollee s income and premium costs. Enrollees pay private insurance premiums equal to a particular percentage of their income, and then subsidies pay for the remainder of premium costs. When premiums rise, the federal subsidy expands so that subsidized enrollees still pay the same amount. The ACA provides additional subsidies to help low-income enrollees with out-of-pocket costs. Conservative lawmakers dislike income-based subsidies because they can be complicated and costly to administer, and also because the program as a whole could be considered a form of welfare entitlement. ACA subsidies are based on the federal poverty level (FPL): AHCA: Fixed Credit Amount, Based on Age The GOP bill calls for replacing the ACA s subsidies with new age-based credits. Regardless of premiums, the bill provides purchasers of individual insurance a refundable tax credit that is greater for older individuals. Unlike the ACA, the credits can also be used for off-exchange insurance plans. The subsidies are intended to account for higher insurance costs for older individuals. Under the Affordable Care Act, insurers can charge older enrollees up to three times as much for premiums, and the draft plan would increase that to a fivefold allowed increase. Unlike earlier draft versions, AHCA subsidies are gradually reduced for individuals with annual income beyond $75,000 (double for joint filers) and are eliminated for individuals who make more than $215,000. $ 11,880 for an individual in 2016 $24,300 for afamily of four in 2016 One taxpayer can claim credits for themselves and four familymembers, with a $14,000limit As income rises, enrollees pay a higher share of income on premiums INCOME LEVEL MAXIMUM SHARE OF INCOME SPENT ON PREMIUMS 100 to 133%FPL 2.03% 13 3% to 15 0 % 4.07% 15 0 % to 200% 6.41% 200% to 250% 8.18% Subsidies are greater for older individuals AGE RANGE SIZE OF REFUNDABLETAX CREDIT (MONTHLY) < 30 years old $ 167 30 to 39 $208 40 to 49 $250 50 to 59 $292 TOTAL ANNUAL CREDIT $2,000 $2,500 $3,000 $3,500 250% to 300% 9.66% 60+ $333 $4000 300% to 400% 9.66%
GOP Plan Would Encourage Use of Health Care Savings Accounts AHCA would emphasize the use of health savings accounts (HSAs), a tax-advantaged savings account that individuals can withdraw from to pay for certain out-of-pocket health expenses such as prescription medicine. In addition to depositing their own savings, the bill would allow individuals to opt to have any leftover funds from their age-based tax credit sent to the health savings account. The plan also makes a host of other changes to health savings accounts to improve their use, including expanding the size of allowed contributions and a reduction of the penalty for non-health-related withdrawls. The bill would also allow individuals to pay for over-the-counter medication with their HSA funds. Refundable taxcredit Insurance premiums Health Savings Account Actuarial Requirements Repealed, Essential Benefits Remain The bill also repeals the ACA s actuarial requirements which required insurers to classify their plans as bronze, silver or gold depending on the share of health costs covered by the plan. Without these requirements in place, insurers are free to offer cheaper plans with higher out-of-pocket costs, similar to the catastrophic coverage plans only available to younger individuals under the ACA. Earlier drafts of the House GOP plan also repealed the ACA s 10 Essential Health Benefits and let each state determine the minimum requirements for health insurance plans. Lawmakers appear to have removed this provision, leaving the secretary of HHS in charge of defining these mandates.
New Funds Would Incentivize States to Improve Costs, Coverage The bill appropriates $15 billion annually for the creation of a Patient and State Stability Fund that would be awarded to state programs for any of the purposes below. If states do not use the funding for their own program, the administrator of the Centers for Medicare & Medicaid Services can use use the funds to help stabilize premiums for patients. Provide financial assistance to high-risk individuals Stabilize premiums in the individual insurance market Reduce coverage costs for high-risk individuals Promote insurer participation in the individual market Promote access to preventive services Provide payments to providers for certain services Reduce out-of-pocket costs for insurance enrollees Other Provisions and Differences From Earlier Drafts The GOP bill repeals many of the taxes that funded the ACA, but does not include a new funding mechanism that was included in prior drafts a cap on the tax exemption for employer sponsored insurance beyond the 90th percentile of current premiums, which would have operated similarly to the ACA s Cadillac tax. The CBO has not yet scored the bill, but the repeal of so many taxes without new funding mechanisms could add to the federal budget deficit. The bill also increases funding for the Community Health Center Program, which awards grants to facilities that serve underserved patients. Funding for the Prevention and Public Health Fund, which critics have accused of serving as a public health slush fund, has been cut. ACA TAXESREPEALED: Tanning tax Prescription drug tax Health insurance tax Net investment incometax Taxes on employer-based premiums Over-the-counter medication tax Medical device excisetax Sources: POLITICO staff reports; Timothy Jost, A look at Republican intentions? Diving into the leaked ACA replacement bill, HealthAffairs Blog By Tucker Doherty, POLITICOPro DataPoint