On June 22, 2017, Senate Republicans released their budget reconciliation ACA-repeal-and-replacement proposal — the Better Care Reconciliation Act (BCRA). It's still unclear at this point whether the GOP has a sufficient number of votes to pass the bill, though, especially given its CBO score, which found that there would be 22 million uninsured Americans under implementation of the BCRA.
BCRA and employers Employers should generally be very happy with the proposal and particularly pleased that the legislation doesn't change the employer/employee "exclusion" from taxation on group health benefits. We'd been concerned with the ongoing discussion of eliminating this exclusion in order to raise tax revenue, as such a change would have a direct impact on both employees and employers. Fortunately, this issue appears to be off the table for now, though we may see it arise again in the future.
As expected, the employer and individual mandate penalties are repealed in this version of the bill. Unfortunately, the employer reporting requirements cannot be repealed through the reconciliation process, and they may still be necessary to administer premium tax credits — though we expect the reporting to be simplified in future legislation or rule-making.
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Another big win for employers was the delay until 2025 of the "Cadillac tax" on high-cost health plans. A full repeal would have violated Senate budget rules because it would increase the federal deficit down the road. Some politicians and analysists speculate that the Senate will propose an amendment that fully repeals the Cadillac tax, but stipulates that the Byrd rule doesn't apply.
Provisions were included in the BCRA to make consumer-driven plans more attractive. With the bill, HSA and FSA contribution limits are increased; over-the-counter medicines are being added as eligible expenses under HSAs, HRAs and FSAs; tax penalties for ineligible HSA expenses are decreasing from 20 percent to 10 percent; and spouses are given the opportunity to make catch-up contributions to HSAs.
BCRA and the marketplace Under the ACA, the employer market has remained fairly stable and continues to cover the majority of Americans. The real challenges of market stabilization are found in the individual market. Providing affordable, sufficient coverage for individuals with health conditions in the private market is a complex issue, and not one where people agree on a singular solution. The ACA attempted to help lower-income individuals through premium tax credits and cost-sharing subsidies, which help lower-income people cover out-of-pocket costs. The BCRA eliminates the ACA's cost-sharing subsidies in 2020. In reality, these subsidies are paid to insurers to enable them to offer richer plans with lower cost-sharing levels for lower-income individuals. Without these subsidies, the insurers will have to offer plans with greater cost-sharing, which may not be attractive or affordable for this segment of the population.
BCRA versus AHCA: What are the differences? The Senate bill differs from the House bill in the mechanism to replace the repeal of the individual mandate. Under the ACA, the intent of the individual mandate was to balance the risk pool, as insurers were required to offer coverage and rate coverage without regard to a person's health condition. The thought was that the mandate would incentivize people to enroll in coverage, which would expand the individual market's risk pool, adding healthy insureds along with the unhealthy insureds to balance out their risks (and help keep premiums down). The House bill's approach was to allow insurers to add a surcharge to individuals who didn't maintain continuous coverage on the assumption that they'd now seek coverage due to a health condition. The Senate bill leaves this out, but it leaves in the prohibition on pre-existing condition exclusions and health underwriting. After initially released, the BCRA added a six-month waiting period for those who have had a gap in coverage, at the urging of the insurance carriers.
The CBO scored the BCRA as stabilizing the individual market, something the ACHA was unable to achieve on scoring. Under the ACA, the individual mandate didn't have enough strength to overcome the increased cost of premiums under the ACA. Therefore, insurers weren't able to attract the young and healthy into their markets, causing some of them to pull out of the exchanges. Certainly, the change in both the House and Senate bill of allowing states to impose a 5-to-1 age band (rather than the current 3-to-1 age band) in their rating structure will benefit younger individuals, but will it be enough to bring costs down to an attractive level? Possibly — if states are given more flexibility with essential health benefits and product design.
BCRA and Medicaid The biggest BCRA debate will be tied to Medicaid and the overhaul of the Medicaid system. A group of Republican senators is very protective of the current Medicaid system and its recipients. Without that faction's vote, it'll be difficult — if not impossible — for this bill to get out of the Senate.
Otherwise, much of the ACA remains, including the premium tax credits (though altered), the health insurance exchanges, the annual and lifetime limit prohibitions, the out-of-pocket maximums, coverage of dependents up to age 26, SBC rules, Form W-2 reporting and more.
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