United States: Senate Republicans Release Bill To "Repeal And Replace" The Affordable Care Act

On June 22, 2017, Senate Republicans released a draft of their legislation to repeal and replace the Affordable Care Act ("ACA"). After the House narrowly passed its version of ACA overhaul legislation, the American Health Care Act (AHCA), on May 4, 2017, attention shifted to the Senate to craft its own proposal. As in the House, Senate Republicans have to walk a fine line between conservative and moderate members of their caucus to secure the support of at least 50 senators, meaning Republicans can afford to lose only two members of their 52-seat caucus. To avoid filibuster of the legislation in the Senate, Republicans are using the budget reconciliation process to try to pass legislation to repeal and replace the ACA with a simple majority vote. Vice President Mike Pence would provide the 51st vote, if needed. Even with the lower-voting threshold of the reconciliation process, the climb to 50 votes appears steep.

The Senate health care bill, the Better Care Reconciliation Act of 2017, would be offered as a substitute to the House-passed legislation. The discussion draft of the Better Care Reconciliation Act differs from the House American Health Care Act in some notable ways, but not as dramatically as some had expected. Like the House bill, the draft Senate bill would eliminate the penalties of the ACA's employer and individual mandates. The ACA's employer mandate imposes a penalty on employers with 50 or more full-time and full-time equivalent employees that fail to offer affordable, minimum value health coverage to full-time employees. The Senate bill would effectively eliminate the employer mandate on a retroactive basis, effective January 1, 2016, by reducing to zero the penalties for failing to offer such health coverage. The Senate draft bill, like its House counterpart, includes provisions to promote the use of health savings accounts. According to an outline of the bill prepared by the Senate Budget Committee, these provisions include: "Expanded tax-free Health Savings Accounts to give Americans greater flexibility and control over medical costs" and " increased contribution limits to help pay for out-of-pocket health costs and to help pay for over-the-counter medications."

The Senate draft bill would delay from 2020 to 2026 the effective date of the so-called "Cadillac" excise tax on high-cost employer plans above a certain threshold. Labor, the business community, and lawmakers from both sides of the aisle have criticized this unpopular tax. As with the House bill, budgetary concerns likely prevented full repeal of the tax in the Senate draft. Under the Senate draft bill, taxes on health insurance, prescription drugs, and medical devices would be repealed.

One of the biggest challenges posed to Senate Majority Leader Mitch McConnell (R-KY) and other Senate bill drafters in garnering at least 50 votes is an estimate by the Congressional Budget Office (CBO) that the House bill would result in 23 million more uninsured people in 2026 than under current law. A CBO estimate is not yet available for the Senate draft bill.

Senators in states that have opted for the Medicaid-expansion provisions of the ACA raised concerns about the roll-back of these provisions in the House bill. To try to accommodate these concerns, the Senate draft provides a longer transition period, beginning a reduction in the amount of federal ACA funds provided to expand Medicaid in 2021, restoring levels of federal support to preexisting law by 2024. The Senate draft also beefs up the subsidies the House bill would provide to people to help them purchase health insurance. Beginning in 2020, the AHCA would replace the ACA's more generous income-based premium tax credits with a refundable monthly age-based tax credit—between $2,000 and $14,000 a year—for low- and middle-income individuals and families that do not receive insurance through work or a government program. The Senate Better Care Reconciliation Act tax credits would be adjusted for age, income and geography.

To shore up the stability of the individual health insurance market, the Senate draft would fund the ACA's cost-sharing reductions. It would continue federal assistance to help lower out-of-pocket health care costs for low-income Americans in the individual market. The fate of the cost-sharing subsidies has been unclear, as a pending House lawsuit challenges their legality, and uncertainty remains whether the Trump administration would continue their funding.

One of the most contested provisions of the ACHA prior to and subsequent to its House passage has been it waiver provisions with respect to certain ACA insurance reforms. To secure House passage, the so-called MacArthur amendment allows a state to apply to receive a waiver from the Department of Health and Human Services to: (1) allow a greater disparity between the cost of policies for older and younger Americans than is otherwise permitted under the ACA, (2) specify their own list of essential health benefits that would need to be provided beginning 2020, and (3) allow health status rating beginning in 2019 for those without continuous coverage. These House bill state waivers are conditional upon the state's operating a risk-mitigation program or participating in a Federal Invisible Risk Sharing Program (FIRSP).

The Senate draft bill takes a somewhat different approach to state waivers from ACA requirements and also boosts funding to help lower health insurance costs for individuals and stabilize the insurance market. The Senate draft would build upon state innovation waivers under Section 1332 of the ACA to give states additional flexibility to decide the rules of insurance. The Senate legislation would create a short-term stabilization fund to balance premium costs and help address coverage and access disruption with $15 billion per year in 2018 and 2019, and $10 billion per year in 2020 and 2021. A "long-term state innovation fund" would dedicate $62 billion, over 8 years, to encourage states to assist high-cost and low-income individuals to purchase health insurance by making it more affordable.

Whether these changes to the House legislation are enough for Senate passage remains to be seen. Majority Leader McConnell plans to bring the bill to a vote in the Senate prior to the July 4th recess. Additional changes to the bill may come before it lands on the Senate floor or during its consideration. If Senate Republicans are successful in passing the Better Care Reconciliation Act through that chamber of Congress, it will have to face another vote in the House of Representatives before reaching President Trump's desk. With very little room for Republican opposition in either the Senate or House, the prospect of legislation reaching the president's desk is still far from certain. Yet, the public release of the Senate draft legislation is no doubt an important step closer towards repealing and replacing the ACA.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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Michael J. Lotito
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