Schedule Appointment

ACA

The AHCA: What Does this Bill Replace, Repeal and Amend?

On May 4, 2017, the U.S. House of Representatives went to the floor for a second time for a vote on the American Health Care Act (AHCA) – just six weeks after House Speaker Paul Ryan pulled the AHCA for not having enough Republican support and conceding that “[w]e’re going to be living with Obamacare for the foreseeable future.”  Since March, the AHCA has undergone some revisions to cure the Republican divide in the House.  To pass the House, the Republicans needed 216 votes. The revisions worked, narrowly, and the bill passed the House, achieving a party-line vote of 217-213.  The bill is now off to the Senate, where a simple majority will be needed, before the bill goes to the President’s desk for signature.

Does the AHCA achieve the Republicans seven-year promise of “Repeal and Replace?”  Not quite.  Essentially, the Republicans are unable to repeal and replace the entire Affordable Care Act (ACA) because they chose the path of budget resolution.  Back in early January, to avoid a filibuster from the Democrats, the House approved a budget resolution allowing Congress to repeal certain key provisions of the ACA.  This same resolution passed the U.S. Senate on January 12, 2017.  Because the Republicans are utilizing the budget resolution process for repeal, only certain provisions of the ACA can repealed, including provisions with respect to the insurance marketplaces, Medicaid-expansion, and the employer and individual mandates, among others.  The provisions that may be repealed under budget resolution must be fiscally relevant and reduce the deficit, i.e., tied to budget issues -- such as federal spending and taxation.  We’ll be hearing quite a bit about this process as this bill moves to the Senate, and then back to the House for approval after the Senate more than likely makes its own revisions to the AHCA.  However, until this process is complete, and the final bill makes it to the President’s desk, the ACA is still the law of the land.

So What Provisions of the ACA Have Been Impacted By the AHCA?

The AHCA primarily targets Article I of the ACA -- Affordable and Available Coverage – which includes the individual mandate, the employer mandate, the premium and cost sharing subsidies, and the insurance exchanges.  The AHCA also targets Article II of the ACA – Medicaid, and Article IX of the ACA – the revenue or tax provisions. 

So what are some of the key provisions that have changed?  Here are some of the highlights:

·       Retroactively effective to 2016, the AHCA repealed the penalties under both the individual and employer mandates. 

·       Beginning with open enrollment for 2019, for any individual who has had a lapse of coverage of more than 63 days in the previous 12 months, the insurer may impose a 30 percent surcharge to the premium cost for that individual for the next 12-month period. 

·       Individual and small group market plans no longer will have to fit into the actuarial tiers of bronze, silver, gold, and platinum.

·       The AHCA created a Patient and State Stability Fund where over the next eight years, $40 million will be appropriated to help fund high-risk pools, reinsurance, maternity, mental health, and substance abuse care.

·       Beginning in 2020, age-based tax credits will become available to individuals who are not eligible for insurance through their employer or a government program.  These credits are refundable and advanceable.  Additionally, these credits will be phased out for those individuals with incomes above $75,000, or joint filers with incomes above $150,000. 

·       Age restrictions would continue to apply.  However, the age ratio limit would be increased from 3:1, as it is now established, to 5:1.

·       The AHCA rescinded any remaining funds in the Prevention and Public Health Fund.

·       The AHCA barred for one year any funding to Planned Parenthood.

·       The AHCA added liberal rules for both health flexible spending accounts and health savings accounts.

·       The Cadillac tax is delayed from a 2020 effective date to taxable periods beginning after December 31, 2025. 

·       The 3.8 percent tax on investment income for those individuals making over $200,000 yearly (or couples making $250,000 yearly) has been eliminated.

·       The 0.9 percent payroll tax for individuals making over $200,000 yearly (or couples making $250,000 yearly) will be eliminated after 2023.

·       States may opt for a block grant rather than a per capita grant with respect to Medicaid funds. 

Please see previous Blog:  The AHCA Passes By A Narrow Margin:  What Does the Bill NOT Repeal and Replace?  And Who's MacArthur? for more information about the AHCA and changes to the ACA.  

Subscribe to our KLF Employee Benefits Blog mailing list!

* indicates required
Email Format

The AHCA Passes By A Narrow Margin: What Does the Bill NOT Repeal and Replace? And Who's MacArthur?

On May 4, 2017, the U.S. House of Representatives went to the floor for a second time for a vote on the American Health Care Act (AHCA) – just six weeks after House Speaker Paul Ryan pulled the AHCA for not having enough Republican support and conceding that “[w]e’re going to be living with Obamacare for the foreseeable future.”  Since March, the AHCA has undergone some revisions to cure the Republican divide in the House.  To pass the House, the Republicans needed 216 votes. The revisions worked, narrowly, and the bill passed the House, achieving a party-line vote of 217-213.  The bill is now off to the Senate, where a simple majority will be needed, before the bill goes to the President’s desk for signature.

What Does the AHCA Not Repeal and Replace? 

In its present form, at the time this article went to press, the AHCA only repeals and replaces about 10 percent of the ACA.  The AHCA only amends, repeals, and/or replaces a few of the ACA's titles, focusing primarily on Title I, which includes the individual mandate, the employer mandate, the premium and cost sharing subsidies, and the insurance exchanges, along with Article II (Medicaid) and Article IX (the revenue or tax provisions).   

The AHCA does not target many of the ACA’s market reforms, such as:

·       Cost-sharing limits on essential health benefits for non-grandfathered plans (see MacArthur Amendments below)

·       Coverage for adult children up to age 26

·       Prohibition on lifetime and annual limits for essential health benefits (see MacArthur Amendments below)

·       Prohibition on health status underwriting (see MacArthur Amendments below)

·       Nondiscrimination rules based on race, nationality, disability, sex or age

·       Guaranteed availability and renewability of coverage

·       Pre-existing conditions (see MacArthur Amendments below)

What are the MacArthur Amendments? 

On April 23, 2017, after the AHCA was put to rest after a disappointing March showing, Tom MacArthur (R-NJ) breathed new life into the bill with what are now known as the MacArthur amendments.  The MacArthur amendments address the ability for states to waive certain provisions of the AHCA to lower premiums and to expand the number of the insured within their state.  States may apply for waivers from the AHCA’s essential health benefits requirements.  Under the essential health benefits, insurers are required to cover ten categories of benefits, including – for example – prescription drugs, maternity and newborn care, emergency services and laboratory services.  By applying for these waivers, states may establish less generous minimum essential benefits than the federal law requires.  This will not only affect the benefits offered, but also could affect the dollar limits tied to these benefits. 

Additionally, states may request waivers for the community rating rules, which only apply to those individuals who do not maintain continuous coverage.  However, states are not allowed to rate based on the following:

·       Gender

·       Age (except for reductions in the 5:1 ratio, which is the new ratio established by the AHCA)

·       Health status (unless the state has established a high-risk pool or is participating in a federally-established high-risk pool)

Thus, for states who are granted a waiver for community rating, insurers in those states may underwrite based upon health status for one year for individuals who have not maintained continuous coverage, but only if that state has established a high-risk pool or participates in a federally-sponsored high-risk pool.  Insurers cannot exclude those with pre-existing conditions, but they can charge much higher premiums that could essentially exclude these individuals, based on high-risk underwriting. 

 On May 3, 2017, Fred Upton (R-MI) and Bill Long (R-MO) drafted the Upton-Long Amendment, which adds financial support to the MacArthur waivers.  This amendment creates an $8 million fund over the next five years for community rating waiver states.  This fund will be used to offset the higher premium costs for those individuals with pre-existing conditions who have had a lapse in coverage and who may be charged higher premiums based on health status underwriting.  

The AHCA is now off to the Senate, and will more than likely face additional amendments.  If it passes the Senate in a revised form, it will return to the House for additional discussion and debate.  We have some volleying back and forth before the bill makes it to the President's desk for signature.  Until then, the ACA is still the law of the land.  As as businesses, we must conduct ourselves accordingly.  

 

Subscribe to our KLF Employee Benefits Blog mailing list!

* indicates required
Email Format

Marketplace Shockwaves: Insurer Exits Leave Marketplaces Vulnerable

Early this month, Aetna announced that in 2018, it will not expand its Health Insurance Marketplace ("Marketplace" or "Exchange") coverage, and is evaluating whether it will completely pull out of the Marketplaces created by the Patient Protection and Affordable Care Act (“ACA”).  Insurer scale backs and exits have become a trend as insurers have been reporting record number losses with enrolled participants that are sicker and require costlier treatments than expected.  Also, insurers are uncertain when the ACA will be repealed, if and when the ACA will be replaced, and what will be offered.  

In 2017, Aetna withdrew from eleven (11) of the fifteen (15) states it offered Marketplace coverage citing huge profit losses.  Aetna currently only offers Marketplace coverage in Delaware, Iowa, Nebraska, and Virginia.  In Nebraska, Aetna is one (1) of only two (2) insurers operating in the Marketplace.  In addition to Marketplace coverage, Aetna also offers Medicaid coverage in sixteen (16) states across the South, Midwest, and Northeast. 

Aetna’s Chief Executive Officer Mark Bertolini has said that the ACA is in a death spiral, meaning the Marketplaces are collapsing under a large pool of sick participants that have few insurer options and rising premiums.  Bertolini has also said that, depending on the market, between one percent to five percent (1%-5%) of Aetna’s customers account for fifty percent (50%) of its costs.  Aetna has stated that is has sustained approximately four hundred and thirty million dollars  ($430,000,000) in losses since 2014 through its operations in the Exchanges. 

While Aetna will not be expanding its operations in the Exchanges, it appears poised to continue to offer individual policies in many states.  However, these policies are sold outside the Marketplaces and are not eligible for federal subsidies.  Humana, which had already significantly lowered its 2017 participation in the Marketplaces, recently announced it was completely leaving the Marketplaces in 2018.  Humana cited poor profits as the reason for exiting the Exchanges.  Humana’s recent announcement could be an indicator of more insurer exits from the Marketplaces.  

According to health insurance analysts, Aetna is one of the top ten insurers operating in the United States.  Humana has also been named as a top ten insurer in the United States by health insurance analysts.  In 2017, Aetna and Humana ended their merger plans following a District Court ruling that granted the Department of Justice’s (“DOJ”) injunction to prevent the merger.  The District Judge in the case called Aetna’s decision to scale back its 2017 Marketplace operations deceitful and aimed at bolstering Aetna’s position in the litigation with the DOJ.  It has been reported that the DOJ warned Aetna that it would attempt to block an Aetna-Humana merger prior to initiating litigation.  Financial analysts calculate that the failed Aetna-Humana merger cost Aetna upwards of $1.8 billion. 

Most of the larger insurers have scaled back coverage for 2017.  Molina Healthcare, which is also a large insurer, has fared well in the Marketplaces compared to other insurers, according to insurance analysts.  However, February 2017 financial filings for Molina Healthcare reveal that the insurer netted profits of about eight million ($8,000,000) in 2016, down from one hundred forty-three million ($143,000,000) in 2015.  Molina Healthcare has announced that it plans to evaluate its participation in the 2018 Marketplaces.  This shows that insurer profits very wildly from year-to-year in the Exchanges and for now insurers’ doubts are not going away.

With the combined market value in the health insurance industry held by large insurers like Aetna, these insurers’ decisions impact the Marketplaces.  Large insurers leaving the Marketplaces create coverage voids that can lead to Marketplace destabilization and eventual collapse.  Mergers between large insurers reduces competition and creates monopolies.  Even seemingly innocuous statements by these insurers about the Marketplaces, or their companies’ operations in the Marketplaces, can cause speculation.  Large insurers are a vital part of the Marketplaces.  Without their full participation, the future of the Marketplaces is uncertain.    

Subscribe to our KLF Employee Benefits Blog mailing list!

* indicates required
Email Format

ACA: Repeal and Replace

On January 13, 2017, the U.S. House of Representatives set the repeal of the Affordable Care Act (“ACA”) in motion.  With a vote of 227-198, the House approved a budget resolution allowing Congress to repeal certain key provisions of the ACA without filibuster from the Democrats.  This same resolution passed the U.S. Senate on January 12, 2017, with a 51-48 vote.  The now-passed budget instructs both the Senate and the House to draft repeal legislation by January 27, 2017.  Two committees in each the Senate and the House are charged with drafting the repealing legislation.  This legislation, like the budget resolution, is also immune to filibuster and may be passed with a simple majority in both the Senate and the House. 

Because the Republicans are utilizing the budget resolution process for repeal, the entire ACA cannot be repealed, only certain provisions, including provisions with respect to the insurance marketplaces, Medicaid-expansion, and the employer and individual mandates, among others. 

Without meaningful replacement, approximately 22.5 million people will likely lose insurance coverage due to the repeal of the insurance marketplaces’ subsidies. 

As of January 1, 2017, 32 states, including the District of Columbia, have expanded Medicaid under the ACA.  Approximately 12.9 million people would lose Medicaid coverage, because the Republican legislation is expected to eliminate the federal funding provisions for such expansion.

For the approximately 150 million people covered under employer-sponsored plans, certain consumer protections, such as the ban against pre-existing conditions and coverage of young adults to age 26, are immune from change under the current budget resolution process.  However, Senate Republicans have recently voted against legislation that would preserve these provisions, thus making such provisions vulnerable. 

Replacement legislation does not have as clear of a path as repeal.  Unlike the repeal path, any replacement legislation will require a “super-majority,” not just a simple majority, meaning, for example, in the Senate, 60 votes will be required for passage.  Thus, Republicans must get cooperation from Democrats to gain the required support for a replacement bill.  Further, from the Republican camp, Congressmen have stated that repeal and replacement could occur 2 to 4 years from now, however, nothing conclusive has been determined.  The next few months will be legislatively instrumental in providing guidance as to content and timing of both repeal and replacement.

This is a process to which we must all pay careful attention, as the largest national reform to the health care system since Medicare in 1965 is about to go through another historical overhaul.  

Subscribe to our KLF Employee Benefits Blog mailing list!

* indicates required
Email Format