On June 22, 2017, Senate Republicans released a draft of the Better Care Reconciliation Act (BCRA), their much-anticipated version of the legislation to “repeal and replace” the Affordable Care Act (ACA). Despite rumors of a re-write of the American Health Care Act that passed in the House of Representatives by a narrow vote on May 4, the BCRA largely mirrors the structure and certain key measures of the House version (see our previous alert dated May 5, 2017). On the other hand, the BCRA has already been criticized by the more vocal opponents of the ACA in the Senate for not going far enough to eliminate measures established under the ACA. The Senate could vote on the BCRA as early as next week, but given the uncertainty surrounding its success, it is likely to undergo amendments prior to then. This alert provides an overview of key provisions of the BCRA and how, as drafted, it would affect aspects of the ACA.
- Both the Senate and House versions of the health care law repeal enhanced federal funding for Medicaid expansion states. Under the BCRA, this would happen gradually. Starting in 2021, enhanced federal medical assistance for expansion states would decline to 85%, and would decrease by 5% each year until its phase-out in 2023.
- Like the American Health Care Act, the BCRA’s Medicaid reforms represent a significant shift in the program’s funding structure. The BCRA imposes per-capita caps on federal matching beginning in 2020. While initially the caps would increase annually in accordance with the consumer price index for medical care (consistent with the House bill), starting in 2025 the caps would instead grow with the consumer price index for all goods – a significantly lower level of inflation than the medical inflation rate. States could also apply for block grants (in lieu of per-capita caps) to provide targeted health assistance for certain enrollees.
- Starting in October 2017, states would be permitted to make Medicaid eligibility redeterminations every six months (or more frequently) for expansion enrollees. As an incentive, the BCRA grants a temporary 5% FMAP increase to states that perform these redeterminations (through December 31, 2019).
- States could require people to maintain employment in order for them to qualify to receive Medicaid.
- The BCRA would repeal the Medicaid DSH cuts for non-expansion states and would permit certain non-expansion states to receive an increase in DSH payments in 2020.
Employer & Individual Mandates
- Like the House bill, the BCRA would repeal both the individual and employer mandates that are central to the ACA’s market stabilization aims.
- Although the House bill provided for a “continuous coverage” penalty that allowed insurers to charge a 30% premium surcharge for applicants with a gap in coverage, the BCRA does not include any such penalty.
Tax Credits for Insurance Premiums
- The ACA established refundable tax credits to help eligible individuals afford health insurance purchased on the exchange. The BCRA preserves the tax credits, determined based on income and geography, but lowers the upper threshold for those eligible to 350% of the federal poverty level.
- Individuals earning less than the federal poverty level (previously thought to be covered under the Medicaid expansion) would now qualify for these credits.
- Like the House bill, the BCRA would repeal the ACA’s actuarial value standards for various tiers of plans offered in the exchanges, and instead applies a “median cost benchmark plan” standard, whereby plans offered on the exchange must cover at least 58% of the full actuarial value of benefits provided under the plan.
State Stability and Innovation Program
- Like the House bill, the BCRA establishes funding aimed at stabilizing insurance markets in the states. The BCRA would allocate $15 billion for each of 2018 and 2019, and $10 billion in 2020 and 2021, to CMS to fund arrangements with health insurers to address gaps in coverage and urgent health care needs. Additionally, the BCRA allots $62 billion in state stability funds to assist states in implementing their own reinsurance efforts.
- As of 2020, the BCRA would repeal the cost-sharing subsidy program that was implemented under the ACA to help lower out-of-pocket costs for lower-income exchange plan enrollees.
Permissible Age Rating
- Like the House bill, the BCRA would modify permissible age variation in health insurance premiums to a ratio of 5:1, whereas the ACA caps the permissible variation at a 3:1 rate.
- The BCRA repeals many of the tax provisions implemented by the ACA. This includes the repeal of taxes on indoor tanning, medical devices, branded prescription drugs, and more.
- Like the House bill, the Senate bill would also repeal a 3.8% tax on investment income retroactively to January 2017 (this investment income tax applies only to individuals making more than $200,000 and married couples making more than $250,000).
- The BCRA would delay the so-called “Cadillac tax” on high-cost employer-sponsored group health plans until 2026.
- The House bill would have allowed states to apply for waivers of certain ACA requirements, including the 5:1 age rating limit, the essential health benefits requirement, and the ACA’s community rating requirements, the latter being the most controversial in that it would effectively would permit insurers to charge higher premiums for individuals with preexisting conditions who failed to maintain continuous coverage.
- The BCRA would make it easier for states to obtain a waiver from the essential health benefits requirement, provided the state’s plan does not increase the federal deficit.
- However, unlike the House bill, the BCRA would not permit a waiver of the community rating requirements.
The BCRA would not modify the ACA provision permitting dependent coverage until age 26, nor the prohibition on denying coverage for pre-existing conditions.