Summary of Senate Health Reform Working Draft

On July 13, 2017 the Senate released a modified version of the Better Care Reconciliation Act of 2017 (BCRA) aka ‘repeal and replace’. The bill will be considered under Senate reconciliation rules which require each provision to have a budget impact (determined by the Senate Parliamentarian).

The July 13th modifications to the June version of the BCRA include:

• Additional funding availability for health care coverage and services:
✓ $70Billion increase in health market stabilization and state innovation funds with 1% of funds set aside for states with premiums that are 75% higher than
the national average (Alaska would likely qualify)
✓ $43Billion increase (to $45 Billion) provided to states for mental health and substance abuse (commonly referred to as funds to combat the opioid epidemic)
✓ Provides funds to health insurers (part or all of the $70Billion increase for health market stabilization) to assist higher risk individuals (those with
pre-existing conditions and who are older) with a plan offered on the health insurance exchange (i.e. providing coverage for essential health benefits)

• Additional approaches to support individual’s purchase of health insurance:
✓ Permit individuals to use Health Saving Account funds for health insurance premiums
✓ Permits individuals to use tax credits for the purchase of catastrophic only health coverage
✓ Allows insurers that offer a plan on the insurance market exchange to also offer non-exchange plans that are exempt from essential health benefit
requirements (the Cruz amendment that allows insurers to offer slimmer coverage options off the insurance market exchange if they have one plan available on
the insurance market exchange)

• Revision to repeal of the ACA taxes by retaining the net investment income tax, Medicare tax for high earners, and high insurance executive compensation tax.

• Modest Medicaid Reform Revisions
✓ Added state Medicaid flexibility allowing states to: 1) include Medicaid expansion population coverage under the block grant; 2) apply for waiver to continue home and community-based services for aged, blind and disabled
✓ Excludes state Medicaid expenditures for a public health emergency from per capita cap or block grant allocation

Expected next steps:

• It is highly likely that the bill will change in pursuit of votes.
• The Congressional Budget Office is expected to release a revised and updated budget estimate early this week.
• The Senate is expected to vote on a motion to proceed this week.
• Senators voting for the motion to proceed are very likely to support final passage given the political and policy weight of the issue (i.e. if the motion to proceed passes, it is likely the bill will pass).

On June 26, 2017, the Senate released a modified version of the Better Health Reconciliation Act (aka “repeal and replace”) and the Congressional Budget Office (CBO) released estimates of the bill’s impact.

  • The key modification made was to add a provision that permits a 6 month delay in coverage for who do not have continuous coverage (a lapse in coverage of more than 63 days).  This provision establishes an economic incentive to maintain coverage.
  • CBO estimates the bill will increase the number of uninsured by 22 million compared to current law.  CBO estimated that the House passed AHCA bill would increase the uninsured by 23 million.
  • CBO estimates the bill will reduce the federal deficit by $321 billion over ten years (2017-2026).  CBO estimated that the House passed AHCA bill would decrease the deficit by $133 billion over ten years.  The increased deficit reduction is likely attributable to steeper reductions in Medicaid spending and a one year ‘delay’ in repeal of the ACA taxes (the House bill would repeal most of the ACA taxes as of Jan. 1, 2017; the Senate bill would repeal most of the ACA taxes as of Jan. 1, 2018)

The Senate bill is titled “Better Care Reconciliation Act of 2017”, and in brief it:

Repeals:

  • Penalties paid by employers if they do not provide health insurance to full time employees
  • Penalties paid by individuals if they do not have health insurance coverage
  • The expansion of Medicaid as of 2020, and from 2020 through 2024 provides reducing federal funds for expansion qualified Medicaid recipients
  • Eliminates the shared federal-state funding formula for pre-expansion Medicaid
  • Most ACA taxes as of January 1, 2018, and delays the 40% excise tax on high cost plans (“Cadillac tax”) until 2026
  • Funding for Planned Parenthood in 2018, and fund from the bill cannot go to plans which cover abortion or providers which offer abortion (unclear if this will survive reconciliation)

Revises:

  • Subsidies of health insurance premiums – it provides a subsidy to those with incomes up to 350% of the federal poverty level (FPL) and for a plan that covers 58% of average health costs [the ACA provided subsidies for people up to 400% FPL and for plans that covered 70% of average health costs]
  • The ratio of premiums for the oldest customers to those of the youngest will be capped at 5-to-1 [under the ACA, this ratio was set at 3-to-1]

Establishes the following, (aka replacement plan):

  • Continuous coverage requirement for purchase of insurance, if insurance lapses for more than 63 days, a 6 month delay in coverage may be imposed.
  • Medicaid block grants based on per capita allocations (state chooses the preferred approach to funding), with growth in that allocation less than in the House version
  • Ability for states to institute Medicaid work requirements
  • Short term state stability fund to provide grants to insurance plans to fund unmet health needs
  • Long term state stability fund to provide grants to states for unmet health needs
  • State innovation waivers to allow for states to apply for flexibility on fast track basis (states may not waive the pre-exiting condition and dependent coverage requirements);
  • More generous contributions to Health Savings Account
  • Mental health and substance abuse state grant program, titled the Medicaid flexibility program (it is a block grant program)

Analysis provided by Wexler|Walker, a unit of Hill+Knowlton Strategies.