March 07, 2017

House Moves Forward With Its ACA Repeal Bills – What You Need to Know

Note: This alert was updated March 9 to reflect the latest legislative developments. 

On Thursday, March 9, two House Committees cleared bills that would repeal and replace the Affordable Care Act (ACA), advancing legislation released Monday evening. The bills now head to the House Budget Committee, which will package them into one bill. As expected, the legislation advanced on party-line votes during testy mark-ups that spanned two days.

Republican leaders will now have to muster a minimum of 218 votes to attain House passage of the legislation. In the following sections, we've provided an overview of the provisions contained within the bills.

ACA Repeal and Replacement

Aspects of the House bill resemble the reconciliation bill passed by Congress but vetoed by President Obama in January 2016. The bill:

  • Authorizes $10 billion over five years to support states that did not expand Medicaid with a state’s share determined by the percentage of residents in the state with incomes under 138 percent of the Federal Poverty Limit (FPL). It would also require states that did expand Medicaid to revisit a beneficiary’s eligibility every six months.

  • Establishes tax credits between $2,000 and $4,000 for individuals (more for families) without employer-sponsored or government health insurance, adjusted by age. Phases out for individuals making more than $75,000 per year ($150,000 for a family).

  • Repeals the Cost Sharing Subsidy (CSR) program and creates a patient and state stability fund intended to help persons afford coverage. The funds could be used for a variety of purposes, including providing subsidies to help stabilize coverage, providing direct support to eligible persons, covering preventive services and providing payments to health care providers directly.

  • Calls for a continuous coverage requirement that will charge anyone who spends more than 63 days without coverage with a 30 percent late enrollment surcharge that will be removed after one year if the person retains coverage.

  • Calls for eliminating the Actuarial Value (AV) requirements associated with the metal tiers and permits state to set age rating bands up to 5:1.

  • Repeals and rescinds funding for the Public Health and Prevention fund, increases funding for Community Health Centers by $422 million in fiscal year (FY) 2017 and defunds Planned Parenthood.

In addition, several ACA taxes would be eliminated in 2018 (including taxes on medical-device companies, health insurers, pharmaceutical manufacturers and indoor tanning salons). The so-called Cadillac Tax is further delayed from 2020 to 2025. Key ACA Medicare provisions, particularly the gradual closure of the Part D “donut hole” and the establishment of the Center for Medicare and Medicaid Innovations to test new reimbursement approaches, are not impacted by the bill.

The bill does not advance one of the initiatives most favored by the Trump administration: encouraging insurers to sell across state lines. However, it does advance another Trump administration favorite—Health Savings Accounts (HSAs)—by increasing the amount that can be contributed to HSAs without being taxed.

Sweeping Changes to Medicaid

Among the most significant non-ACA components of the bill include sweeping changes to the Medicaid program that ends the matching requirement in an effort to make federal Medicaid spending limited and predictable. The bill freezes enrollment and then gradually repeals expansion of the Medicaid program, and it repeals Medicaid Essential Health Benefits (EHB) requirements, punting such decisions to the states. It also repeals cuts to the Disproportionate Share (DSH) program that were made to recognize gains in coverage through Medicaid expansion and the exchanges. In addition, the bill calls for converting to a per-capita cap requirement that will use FY 2016 funding as the baseline and break the Medicaid population into five categories:

  • Elderly
  • Blind and disabled
  • Children
  • Non-expansion adults
  • Expansion population

The bill would provide an annual increase in the federal contributions to the urban average of the medical component of the Consumer Price Index (CPI). Beginning in FY 2020, if states spend above their target expenditures, the amount of federal contribution per-quarter will be reduced by one-quarter of the overage. The bill excludes some populations and categories from determining this calculation including DSH payments, CHIP expansion, Indian Health Service beneficiaries, dual-eligibles and beneficiaries covered under breast and cervical cancer programs.

What's Next?

The House Energy & Commerce and Ways & Means Committees have both scheduled markups on the bill for Wednesday as part of a leadership plan to advance the bill through the House by the end of March. The path forward in the Senate will be challenging, particularly as also on Monday four Republican Senators—Rob Portman of Ohio, Lisa Murkowski of Alaska, Shelley Moore Capito of West Virginia and Corey Gardner of Colorado—expressed opposition to any bill that would erase gains in coverage.

The Congressional Budget Office has yet to score the bill, which may still be tweaked in committee mark-up prior to a vote by the House.

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