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The Proposed American Health Care Act (AHCA): A First Look at ACA Repeal and Replace

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The U.S. House Ways and Means Committee and the Energy and Commerce Committee proposed legislation on March 6, 2017 intended to repeal and replace the Affordable Care Act (ACA) with the American Health Care Act (AHCA). They have introduced this through a budget process called reconciliation, which allows them to repeal parts of the ACA that affect federal spending. The reason this budget process is being used is because there are not enough Republican seats in the senate to overcome a filibuster if the traditional legislative route was used. Additionally, as of today’s date, the Congressional Budget Office has not provided any cost analysis on the bill.

 

What happens now that the AHCA has been proposed?

Today, Wednesday, March 8, 2017, the two committees will meet for “markup sessions.” During these sessions they will debate, amend, and/or rewrite the proposed legislation. They plan to vote on the bill without a cost analysis in order to get it through the House of Representatives prior to their spring break on April 7, 2017.

 

What ACA measures would stay the same?

  1. Pre-existing Condition Exclusions. If passed, the AHCA will continue to prohibit health insurers from denying or charging higher rates due to pre-existing conditions.
  2. Employer-Sponsored Health Plan Taxes. The AHCA proposes to keep the current tax treatment of employer-sponsored health care plans.
  3. Dependent Coverage. The AHCA plan is to continue to allow dependents to stay on their parents’ health plan until age 26.

 

What are the proposed AHCA changes?

  1. Pay-or-Play. The Pay or Play insurance mandate currently means penalties for individuals who chose to go without health insurance and certain large employers who fail to provide coverage. Under the proposed law, this rule would be repealed. Penalties assessed for pay or play would be eliminated retroactively to January 1, 2016.
  2. Cadillac Tax. The Cadillac tax is an excise tax on high-cost health insurance plans with premiums over a specified amount. AHCA aims to delay the Cadillac Tax until 2025.
  3. Age-Based Rates. Current law allows insurers to charge higher premiums for older Americans compared to younger individuals at a 3-to-1 ratio. Under the new proposed bill, this could increase to 5-to-1. Premiums for younger people may also decrease.
  4. Health Savings Accounts (HSAs). Currently, there is a 6% excise tax on excess HSA contributions. The proposed bill would eliminate this tax. Additionally, HSA contribution limits would increase.
  5. Flexible Spending Accounts (FSAs). Like the HSA, FSA limits would increase. Plus, using FSAs for over-the-counter drugs would be allowed again.
  6. ACA Cost-Sharing Reduction (CSR) Subsidies. CSR Subsidies lower out of pocket costs for non-Medicare eligible Americans who are enrolled in Silver plans purchased on the Health Insurance Exchange/Marketplace. Under the new bill, these subsidies would be repealed and replaced with the Patient and State Stability Fund. This $100 billion fund (invested over 10 years) would go to the states. States could use the funds to increase the size of the tax credits for these individuals, build high-risk pools for those with costly medical conditions, or send money to insurers who cover patients who have claims higher than $50,000 in a single year.
  7. Essential Health Benefits. The ACA set federal standards for qualified health plans to cover essential health benefits such as hospitalization, maternity care and mental health coverage. Under AHCA, states would have authority to set these standards.
  8. Advance Premium Tax Credit (APTC). APTC is a tax credit under the ACA for lower income individuals that can be taken in advance to lower their monthly health insurance payments when they apply for coverage on the Health Insurance Exchange/Marketplace. APTC would be repealed under the new bill. A premium tax credit would be created for those individuals who do not receive insurance through an employer or the government who are below 300% of the federal poverty level.
  9. Abortion. The bill proposes that no Medicaid reimbursement can be made to any organization that provides for abortions, other than those performed in cases of rape or incest or to save the life of the mother. Additionally, no federal tax credits will be given to any health plan that includes elective abortion coverage, even if the individual with that coverage does not have an abortion.
  10. Medicaid Funding. Since 1965, funding for Medicaid – both at the federal and state levels – was guaranteed regardless of enrollment or cost. The ACA expanded this funding and increased eligibility. The legislation calls for ending this funding by 2020, but would allow individuals already enrolled to remain enrolled. The new bill proposes instead to provide “Block Grants” (essentially fixed amounts) to states. These grants would pay different amounts for children, older Americans and the disabled. Each state could determine how to use the funding.
  11. Health Insurance Tax and Medical Device Tax. Both would be repealed under the proposed bill.

 

If passed, when would the AHCA become effective?

The AHCA is proposed to take effect on or after January 1, 2018.

 

What do you think of the AHCA’s proposed changes? Start the conversation. Comment below.

 

 

National Insurance Services is not a law firm and no opinion, suggestion, or recommendation of the firm or its employees shall constitute legal advice. Readers are advised to consult with their own attorney for a determination of their legal rights, responsibilities and liabilities, including the interpretation of any statute or regulation, or its application to the readers’ business activities.

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Valerie Ortiz

Valerie Ortiz

Over the past 15+ years, Valerie Ortiz has worn many hats at National Insurance Services. She currently heads up NIS’ Marketing Team where she helps to create and execute employee benefit communications based upon our public sector clients’ needs. Valerie brings order to the chaos and has a zeal for detail and a talent for organization.