The Affordable Care Act’s journey to repeal and replace has reached a significant milestone: On June 22, 2017, the Senate unveiled Better Care Reconciliation Act (BCRA) of 2017 [H.R. 1628]. The bill would replace the Affordable Care Act and establish a system that is anticipated to reduce the cost of healthcare, expand available plan options for consumers, reduce federal spending, and grant small businesses and associations the capability to establish small business health plans that operate outside of state insurance regulations.
What healthcare is going to look like under President Donald Trump’s administration has been a source of uncertainty throughout the industry. For issuers, concerns over higher premiums, fewer choices, and the BCRA of 2017’s impact on Medicaid Expansion after 2020 have become sovereign pain points. Other developments, including the Center for Medicare and Medicaid Services’ decision to discontinue the Federally-Facilitated Small Business Health Options Program (FF-SHOP) have added to the perplexity. Currently, the FF-SHOP serves 7,554 employers and 38,749 employees.
While the BCRA of 2017 is not a law yet, it is likely to undergo quite a few changes as it goes through the Senate. At its current state, the BCRA of 2017 significantly replicates some of the major provisions of the American Health Care Act (AHCA) [H.R. 1628], as well as some provisions in the Affordable Care Act, a system where several major issuers have found success.
Both the BCRA and AHCA would effectively eliminate the employer and individual mandates, repeal the small employer tax credit, offer tax credits to offset healthcare costs, permit dependent coverage until 26 years of age, protect consumers against discrimination, and offer guaranteed coverage regardless of health status. In this equation, issuers are likely to be the winners.
But, there are a number of stark changes to keep in mind. We see five areas of the bill that demand attention.
People would still receive subsidies
Under the Senate GOP health plan, individuals will receive monthly, advanceable, and refundable tax credits to help pay for their health insurance premiums. Unlike the AHCA, which would provide tax credits that were tied to income and age, tax credits under the Senate’s version would be tied to only income. The tax credit amount would be phased out at 350% of the Federal Poverty Level (FPL), compared to 400% FPL under the current law.
No penalties to promote continuous coverage
Unlike the Affordable Care Act’s insurance mandate, both the BCRA of 2017 and the AHCA did not include an enforceable tax penalty for not having health insurance. The AHCA introduced a new type of penalty for lapsed coverage while the Senate’s version did not include such a provision within its discussion draft.
Individuals will have expanded access to Health Savings Accounts
The BCRA of 2017, similar to what was included in the AHCA, will nearly double the maximum allowed tax-deductible contribution. In 2017, individuals would be able to deduct $6,550 in contributions to an HSA. The GOP plan would allow people to put substantially more money into their HSA accounts and allow spouses to make additional contributions. Beginning in 2018, the basic limit would be increased to $6,650 for an individual and $13,300 for families.
States would be allowed to opt out of most consumer protections
The Senate GOP health plan would not explicitly eliminate the guaranteed coverage provided by the Affordable Care Act, but would allow states to seek waivers from several consumer protections. Under the waiver option, known as the MacArthur amendment, issuers in “opt-out” states would be able to charge those with pre-existing conditions more than the premium rate if the consumers had a lapse in coverage longer than 63 days, according to the Henry J. Kaiser Family Foundation.
Small businesses and associations would be allowed to create association health plans
The Senate bill would grant small businesses and associations the capability to establish small business health plans that operate outside of state insurance regulations. These association health plans, also known as group trusts, multiple employer welfare associations, or Small Business Health Plans, would provide more than 28.5 million small employers with the option to offer competitive and affordable health benefits to employees and maintain common benefits across state lines. According to supporters of this Senate bill provision, this would allow small businesses to buy more affordable coverage.
Bottom line
The Senate bill has instilled a philosophy that will transfer more responsibility to the consumers, states, and health issuers. The BCRA of 2017 includes several provisions that would help healthcare payers improve their medical loss ratios, keep costs down, and remedy financial hardship incurred during past years. The potential for the 167 issuers participating on the Exchange today to flourish is there, despite the uncertainties ahead. This would also be a favorable move for more than 28.5 million small businesses operating in the United States.
