The “Discussion Draft” released June 22, 2017 by the Senate Budget Committee carries the House Bill number (H.R. 1628) of the American Health Care Act, and kills taxes like the House bill, but there are major differences, too. At 142 pages, the Discussion Draft is less than one-sixth the heft of the ACA but it’s a brutal read. Here are a few of the highlights that can be explained simply in this format, as we prepare for a likely vote-a-rama sometime before July 4.
It’s been re-named the “Better Care Reconciliation Act of 2017.” There’s a message in that moniker. No Senate Republican will consider this the best they can do. The hope is that 50 will consider it better than the status quo and therefore good enough for government work.
The premium tax credit subsidies for individual policies purchased through an ACA Exchange survive, though trimmed a bit. The household income eligibility limit drops from 400% to 350% of the federal poverty level. If excess subsidies are paid, the feds will be allowed to recover the full amount of the excess payments and can add a 25% (up from 20%) penalty for materially incorrect credit applications. Also, the credits will be based on the premium for a “median cost benchmark plan” rather than the second lowest cost silver plan, and the new benchmark plan can have an actuarial value as low as 58%. Similarly, it may become harder to qualify for the premium subsidy based on the high premium or low value of an employer coverage offer based on how Code § 36B affordability and value are redefined.
BCRA expressly funds ACA § 1402 cost-sharing reductions through 2019 but repeals the program at the end of that year.
Community rating survives but states may elect an age ratio as high as 5 to 1 beginning in 2020. Also starting in 2020, states may take control of medical loss ratio and rebate rules.
The small employer tax credits under Code § 45R disappear after 2019.
The individual and employer mandate taxes stay on the books but the rates and amounts are set at ZERO after 2015. This permits the IRS to assess and collect 2015 taxes.
These taxes are eliminated, with these conditions:
- The Cadillac plan tax of Code § 4980I disappears from 2019 through 2025 but reappears in 2026;
- The $2,500 annual FSA contribution limit ends this year;
- The ACA § 9008 prescription drug tax also expires this year, along with the medical device tax in Code § 4191, the tanning tax of Code Chapter 49 and the health insurance tax of ACA § 9010;
- The net investment tax is repealed retroactive to January 1, 2017;
- The Medicare tax of Code § 3101 is cut back beginning in 2023.
HSA contribution limits will match out-of-pocket plan maximums and both spouses will be allowed to make HSA catch-up contributions.
Beginning one year after enactment, BCRA also creates a new legal entity – the fully-insured, single sponsor, multi-employer/member “Small Business Health Plan,” regulation of which is primarily federal, with broad ERISA pre-emption of state regulation. A federally-registered SBHP may issue coverage across state lines with just limited exposure to regulation by its “home” state. However, the approved plan must forbid participating employers to fund individual market coverage for otherwise eligible employees based on the health status of those employees.
You have just read a very high-level summary of about 40% of the text of this Discussion Draft. The remaining 60% proposes significant changes to Medicaid, DSH payments and state health care program funding and administration. Those are so complex that we’ll await an actual bill to review.