The following Update provides an overview of two Health Care Reform Replacement Bills between the House and the Senate in comparison to the current Affordable Care Act.
Presently there are two Health Care Reform Replacement Bills circulating and pending the necessary votes for approval.
- American Health Care Act (AHCA) – House Bill
- Better Care Reconciliation Act (BCRA) – Senate Bill
WHAT ARE THE DIFFERENCES
The Better Care Reconciliation Act, like the American Health Care Act, radically revises Medicaid, but it is closer to the Affordable Care Act on how it approaches subsidies to buy individual insurance. Both the House and Senate bills eliminate taxes that paid the costs to cover more people through Medicaid and to subsidize individual plans.
Here is summary overview of how both the AHCA and BCRA compare to the current ACA:
SUBSIDIES
Current law: Available for individuals or families that earn between 138% and 400% of poverty, as long as they don’t have access to affordable plans through an employer or other source. Are based on age, income and local cost of insurance.
AHCA: Available for everyone, as long as they don’t have access to affordable plans through an employer or other source. Are age-based only, and more generous than current law to younger customers.
BCRA: Available to those below 350% of poverty, solving the glitch that occurred in non-expansion states. Based on age, income and local cost of insurance, but the sliding scale is less generous for those age 50 and older, starting at 200% of poverty. Those near the top of the subsidy eligibility who are 60 years old could only receive a subsidy if the plan costs more than 16% of annual income. Subsidies are geared to a plan with an actuarial value of 58%, just below a bronze-level plan. The current subsidies are tied to the silver plans, which cover 70% of costs for most customers
ESSENTIAL HEALTH BENEFITS, MEDICAL UNDERWRITING, PRE-EXISTING CONDITIONS
Current law: 10 essential health benefits are required in all insurance, including prescription drugs, maternity care and mental health care. Plans have to sell to everyone, and cannot charge sick people more.
AHCA: States may apply for waivers to drop essential benefits or the rules on charging sick people more, but those changes only apply to those who did not maintain continuous coverage.
BCRA: States may apply for waivers to essential benefits, but not for rejecting sick applicants or charging them more.
INDIVIDUAL MANDATE
Current law: Everyone is supposed to buy insurance or face a tax penalty. Companies with at least 50 employers are required to offer insurance.
AHCA: Those who don’t buy insurance can be charged 30% more per month for one year when they try to come back in. No employer mandate.
BCRA: No mandate.
INDIVIDUAL MARKET
Current law: Continue to be paid to insurers. Age based community rating 3:1. People using healthcare marketplaces and making less than $48,000 a year receive subsidies to help them buy insurance. The amount of the subsidy is tied to a person’s income and to the cost of the insurance in the person’s area. The subsidies are automatically applied to the consumers’ monthly insurance bills, rather than having to wait for a rebate.
AHCA: Paid in 2019 and 2020 only. Age based community rating 5:1. Consumers would still receive subsidies which would phase out at incomes of $75,000 per year. The amount would be tied to a person’s age, not income, so younger low-income people would get less help. The subsidies would not vary with the cost of insurance, so people in high-cost areas would also not get as much help, proportionally. Anyone who goes without insurance for more than two months would face a six-month waiting period to get coverage when they buy a new plan
BCRA: Paid in 2019 and 2020 only. Age based community rating 5:1. Still links aid to consumers’ income, though it would stop at 350% of poverty level, compared to the 400% under the current law. A new formula for setting the amount of subsidies would tie them to the cost of less comprehensive health plans. That means many consumers would get substantially less assistance than under the current law. Cost-sharing subsidies for insurers to help cover deductibles and co-payments for low-income customers would end in 2020, but could be cut off earlier. Does not include financial penalties for people who do not maintain coverage. People who haven’t been continuously covered would have to wait six months before they can purchase a new plan.
MEDICAID EXPANSION
Current law: Enhanced federal match for expansion population is 95% this year, 94% next year, 93% in 2019 and 90% in 2020 and beyond
AHCA: Enhanced match for expansion population maintained as described in ACA until 2020, when those who were still on receive enhanced match until they cycle out of the program.
BCRA: 90% match in 2020; 85% in 2021; 80% in 2022; 75% in 2023. No grandfathering. After 2023, federal contribution is based on general state match percentage
MEDICAID FINANCING
Current law: States design benefit packages, provider reimbursement levels and eligibility, within federal parameters, and the federal government’s match rate varies depending on the wealth of the state, ranging from 50% to 73%.
AHCA: Starting in 2020, the federal contribution would be a dollar figure for various groups within Medicaid, which would only be allowed to grow by either the medical component of the Consumer Price Index or medical CPI plus 1 percentage point. The aged and disabled adults would be under the more generous per capita cap. Each state’s base figure would be based on historic per enrollee spending.
BCRA: Starting in 2020, the House version of the per capita cap would take effect, excluding children who are on disability. Instead, they would be under the old match. Starting in 2025, the per capita cap would grow at standard inflation, which is substantially lower than medical CPI. States would have more flexibility on how to set the base rate.
The HHS secretary would be required to even out the base rates for states by increasing low-spending states’ contributions by at least 0.5% but not more than 2%. The secretary would also be required to penalize states that spend 25% or more above the average spending limit, within the same parameters. However, “low density states,” which are Alaska, the Dakotas, Montana and Wyoming, would be exempt. Current per enrollee spending for seniors, for example, has 21 states that spend at least 25% above the national average, including those five, but also near the top are Connecticut, Delaware, Indiana and New Mexico.
TAXES
Current law: Insurers, hospitals, medical-device manufacturers, rich employer-based plans and investment income, among others, were tapped to pay for the expansion. Some of those taxes, especially the Cadillac tax on rich employer plans, were so unpopular they were never implemented. The investment income tax is the biggest funder.
AHCA: The taxes are repealed, though not all immediately.
BCRA: The taxes are repealed, some retroactively, such as the investment tax, and some in 2018 and 2023. The Cadillac tax is temporarily repealed, but returns in 2026.
BOTTOM LINE
The Senate’s (BCRA) and the House’s (AHCA) might bring premium costs down for some, but offers less assistance and less on healthcare coverage which means hospitals, the sick, poor, and elderly may see new hurdles while (business, large employers, high earners) will see tax breaks.
As changes to our health care system make their way through the legislative process, CBIS will make sure you’re up-to-date
ADDITIONAL INFORMATION
Information contained in this Important Updates—In The Know & How It Applies is not intended to render tax or legal advice. Employers should consult with qualified legal and/or tax counsel for guidance with respect to matters of law, tax and related regulations. Creative Benefits & Insurance Solutions provides comprehensive benefits advice and administrative services with respect to all forms of employee benefits, risk management, property & casualty, workers’ compensation, staffing insurance and human resources services. For additional information about our services, please contact us at (586) 992-0404 or email us at service@cbis-lc.com.
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