June 23, 2017 Senate Republicans release discussion draft of health care bill Senate Republican leaders on June 22, 2017, unveiled a discussion draft of legislation to repeal and replace the Affordable Care Act (ACA), naming their legislation the Better Care Reconciliation Act of 2017 (BCRA). The legislation was revealed after several weeks of private negotiations among Senate Republicans. The BCRA legislation closely aligns with legislation approved by the House on a 217-213 vote on May 4, known as the American Health Care Act (AHCA). Similar to the House-passed bill, the Senate discussion draft repeals the Medicaid expansion, caps Medicaid spending, zeroes out the employer and individual mandate penalties, makes changes to premium tax credits and repeals cost-sharing reduction subsidies, includes provisions designed to stabilize the individual insurance market, allows for flexibility on insurance market rules, and repeals taxes and fees that were established in the ACA. The Congressional Budget Office (CBO) said today they plan to release an estimate for the Senate health care plan early next week. The release of a CBO score will initiate further discussions with the Senate parliamentarian to determine what provisions in the legislation may be eliminated through enforcement of the so-called Byrd rule, which prevents the inclusion of extraneous (non-budgetary) matters in a Senate reconciliation bill. Furthermore, as Republican leaders work to secure 51 votes for the legislation, additional changes are expected. Several conservative Republican Senators are pushing for additional ACA provisions to be repealed. "Currently, for a variety of reasons, we are not ready to vote for this bill, but we are open to negotiation and obtaining more information before it is brought to the floor," Ted Cruz (R-TX), Ron Johnson (R-WI), Mike Lee (R-UT) and Rand Paul (R-KY) said in a joint statement. "There are provisions in this draft that represent an improvement to our current healthcare system but it does not appear this draft as written will accomplish the most important promise that we made to Americans: to repeal Obamacare and lower their healthcare costs." Other moderate Republicans are raising concerns about the impact of the Medicaid changes in the discussion draft released today. Senator Portman (R-OH) noted: "There are some promising changes to reduce premiums in the individual insurance market, but I continue to have real concerns about the Medicaid policies in this bill, especially those that impact drug treatment at a time when Ohio is facing an opioid epidemic." Republicans hold 52 seats, meaning they can only lose the votes of two GOP Senators to pass health care legislation under reconciliation. Republican leaders plan to work over the coming days to make sufficient changes to garner at least 50 votes, potentially relying on Vice President Mike Pence to break a tie vote. Senate Republican Leader Mitch McConnell (R-KY) has noted his strong desire to take up and vote on the health care legislation before the 4th of July recess. Senate Democrats have launched a vigorous attack against the GOP discussion draft and the process used to develop and consider that legislation. Senate Democratic Leader Chuck Schumer (D-NY) noted in a speech on the Senate floor today: "Even as we continue to get more details, the broad outlines are clear: this is a bill designed to strip away healthcare benefits and protections from Americans who need it most in order to give a tax break to the folks who need it least." Additional information about key provisions in the discussion draft are outlined below. Repeal of ACA Taxes The BCRA includes nearly $1 trillion in tax cuts over 10 years. Like the House-passed American Health Care Act (AHCA), the BCRA draft would repeal the 3.8% net investment income tax effective beginning in 2017, implementation of the Cadillac tax would be delayed until 2026, and repeal of the .9% Medicare surcharge tax on individuals earning over $200,000 annually would be effective beginning in 2023. A chart comparing effective dates between the House bill and Senate draft is at the end of this Alert. Medicaid The BCRA includes a number of provisions that are designed to limit Medicaid spending and provide additional flexibility to states in designing and managing their Medicaid programs. Medicaid expansion. The BCRA phases out the ACA's Medicaid expansion starting in 2021, by ramping down the enhanced federal match to states over three years through 2024. Unlike the House bill, Medicaid expansion enrollees who are enrolled prior to 2021 will not be "grandfathered" at the higher 90% federal match rate if they remain continuously enrolled. General Medicaid. The discussion draft proposes to change Medicaid's existing funding structure and institute a per capita cap on federal assistance starting in FY2020. In 2025 and beyond, federal funding for Medicaid in each state will be adjusted annually by a growth rate tied to the consumer price index for urban consumers (CPI-U). The BCRA also proposes to provide additional flexibilities to states in how they operate their Medicaid programs, including an option to apply for a block grant for certain eligibility categories (under which some additional program requirements could be waived) and an option to make eligibility for certain populations contingent upon meeting work requirements. The current requirement to provide essential health benefits as part of any benchmark Medicaid benefit package is also eliminated. Enhanced federal matches would be provided to states that make eligibility determinations every six months and take steps to improve their IT and data systems. Tax credits The Senate discussion draft makes changes to the premium tax credit in Section 36B, building off of the existing ACA tax credit structure, which adjusts the size of the credit based on family income and the cost of coverage in a geographic region. The BCRA proposes to maintain the current tax credit through 2019. In 2020 and beyond, the draft proposes to limit the tax credits to those between 0 and 350% of the federal poverty level (compared to 100-400% of FPL today). As a result, individuals below 100% FPL who live in non-expansion states would be eligible for a premium tax credit, but the tax credits would phase out at lower income threshold. The draft bill would replace the plan value used to determine the amount of the tax credit from the silver plan (with an actuarial value of 70%) to a benchmark plan with an actuarial value and premium level of 58%. It would also allow premium tax credits for coverage purchased outside of the exchanges. The discussion draft also appropriates federal funding for cost-sharing reduction (CSR) subsidies through 2019 and proposes to eliminate CSR subsidies in 2020 and beyond — potentially exposing lower income individuals to higher out-of-pocket costs. In addition, the BCRA draft zeroes out penalties for both the individual and employer mandates like the House-passed bill. However, the draft does not make any changes to the employer and insurer reporting requirements in Internal Revenue Code Sections 6055 and 6056. Insurance market reforms The BCRA makes a number of changes to the insurance market, such as: — Allowing insurers to employ a 5:1 age rating — Expanding the scope of Section 1332 waivers to allow states to waive requirements, including essential health benefits and allowing tax credits for off-exchange insurance products — Establishing through the CHIP program both a short-term and long-term market stabilization program. The short-term ($50 billion) program would be run by the CMS Administrator and would be designed to address disruptions in coverage and access and to respond to urgent health care needs within states. The $62 billion, 8-year, Long-Term State Stability and Innovation Program would fund state proposals to address high out of pocket costs, lower premiums or otherwise stabilize state marketplaces — Maintaining ACA pre-existing condition and guaranteed issue requirements — Eliminating the medical loss ratio (MLR) established by the ACA for individual, small group and large group plans in 2019 — Requiring states to establish their own MLRs beginning in plan year 2019 — Modifying ERISA to establish small business health plans Miscellaneous — Repeals the Prevention and Public Health Fund in FY2019 and beyond — Provides $2 billion to HHS for grants to states for substance use and mental health disorders
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