House GOP Unveils ACA Repeal/Replace Bill
On March 6, 2017, House Republicans revealed the American Health Care Act (AHCA) to repeal and replace the Affordable Care Act (ACA). In response, many politicians and lobbyists have expressed their disappointment that the AHCA did not completely replace the ACA, referring to it as “Obamacare lite” or “Obamacare 2.0.” Additionally, the American Medical Association, American Hospital Association, American Academy of Pediatrics, American Psychiatric Association and the Federation of American Hospitals have criticized the AHCA and expressed concern that the new plan will negatively impact patients and the practice of medicine.
Although current House leadership hopes to get the repeal and replacement legislation through the House in the next few weeks, the process of amending and debating the bill undoubtedly will take time. We will continue to monitor the proposed amendments to the AHCA.
Below are some highlights of the proposed legislation:
Status Quo: The AHCA did not change the ACA’s provision that allows parents to keep their children on their insurance until they are 26. Further, consumers who maintain continuous coverage cannot be denied insurance because of pre-existing conditions. The AHCA also maintained the ACA’s cost-sharing reductions for co-payments and deductibles until 2020.
Gradual Freeze on Medicaid Expansion: One of the biggest concerns for hospitals and medical providers is the AHCA’s significant changes to the Medicaid program. Under the ACA, the Medicaid program was expanded to cover more low-income Americans. Under the AHCA, Medicaid expansion would continue through January 1, 2020. At that point, enrollment would freeze and legislators expect that enrollees will drop out of the program as their incomes and circumstances change.
Medicaid Funding: The AHCA would convert Medicaid to a “per capita cap” system, wherein states would get a lump sum from the federal government for each enrollee. Beyond providing a lump sum on a per-person basis, the AHCA limits federal responsibility, shifting that burden to the states. However, since states are not likely to have the funds to make up the difference, they will be forced to reduce eligibility, curtail benefits or cut provider payments.
Hospitals: Under the ACA, the federal government eliminated “disproportionate share payments” or funds provided to certain hospitals to offset some of the cost of caring for patients who cannot afford to pay. Under the AHCA, these disproportionate share payments will be reinstated. Nevertheless, with the AHCA’s proposal to cut Medicaid funding, hospitals will be forced to increase their charity care spending which will result in decreased revenues.
Coverage for Older Customers: The AHCA allows insurers to charge older customers no more than five times the amount they charge to their younger customers. Under the ACA, insurers were limited to charging no more than three times what is charged to younger customers.
Individual Mandate: The AHCA does not mandate that all Americans be covered by health insurance or pay a penalty. However, in order to discourage gaps in coverage, the AHCA provides that anyone who does not have coverage for a period of 63 days or more in the previous year is subject to a 30 percent increase in premiums as a penalty.
Tax Credit: Under the AHCA plan, the ACA’s income-based premium assistance is replaced to provide individuals tax credits tied to age: individuals younger than 30 would receive a $2,000 annual credit, younger than 40 would receive a $3,000 annual credit, younger than 50 would receive a $3,500 annual credit, while those 60 or older would receive a $4,000 annual credit. The subsidies would diminish for individuals earning more than $75,000 and households earning more than $150,000, declining by $100.00 for every $1,000 in income. The credits disappear for individuals who earn more than $215,000 with a cap for $290,000 for joint fillers.
Tax Breaks: The AHCA would repeal the 3.8 percent Medicare tax on investment income, a 0.9 percent surcharge on wages above $250,000 and the 0.9% Medicare payroll tax hike. Additionally the AHCA proposed to strike down the 2.3 percent medical device excise tax and would repeal the limit that insurance companies can deduct only $500,000 of their executives’ pay as a business expense starting in 2018.
Health Savings Accounts: The AHCA allows individuals to contribute more to Health Savings Accounts by nearly doubling the cap. The penalty for withdrawing from a Health Savings Accounts will be reduced from 20 percent to 10 percent. Additionally, individuals with health savings accounts, flexible spending accounts or health reimbursement accounts can use pre-tax funds to buy over-the-counter medicines.
Excise Tax on High-Cost Company Sponsored Programs: In December 2015 Congress enacted a two-year delay in the controversial excise tax on high-cost health plans under the ACA, postponing its effective date from 2018 to 2020 (Cadillac Tax). Under the AHCA, the Cadillac Tax would remain but not take effect until 2025.
Planned Parenthood: The AHCA states that Medicaid cannot directly or indirectly fund any health-care organization that “provides for abortions”. Further, under the AHCA, tax credits would not be allowed for health plans that cover abortion (except in cases of rape, incest, or to save the life of the mother).