After narrowly passing the Budget Committee, the Republican-sponsored health reform repeal and replace bill, the American Health Care Act (AHCA), is scheduled for a floor vote for Thursday, March 23, 2017, seven years to the date that the Affordable Care Act was signed into law.
As previously reported here, the Congressional Budget Office (CBO) released a report last week on the estimated impact of the AHCA (the “CBO Report”). CBO estimates that the AHCA will reduce Federal deficits by $337 billion over 10 years; the largest savings would come from reducing the number of people covered by Medicaid and eliminating the ACA subsidies for insurance purchased individually (nongroup health insurance). The largest costs would come from repealing changes the ACA made to the Internal Revenue Code, which includes an increased Hospital Insurance payroll tax rate for high-income taxpayers, a surtax on those taxpayers’ net investment income, and annual fees imposed on health insurers.
Impact on Health Insurance Coverage
Perhaps the most widely publicized finding of the CBO report was CBO’s prediction that “14 million more people would be uninsured under the legislation than under current law” and would rise to 24 million in 2026. In 2026, the report estimates that 52 million people would be uninsured, compared with 28 million uninsured people under the current law in that year.
This estimate is based on the impact of repealing penalties associated with the individual mandate, noting that many of the people currently with coverage only chose to have insurance under the current law to avoid paying penalties, and some people would forgo insurance because of higher premiums. Lower insurance coverage would also stem from changes to Medicaid enrollment, including terminating enhanced Federal matching funds for Medicaid expansion and capped per-enrollee spending.
Impact on Premiums
CBO estimates that average premiums in the nongroup market would be 15 percent to 20 percent higher than under the current law prior to 2020, and lower average premiums thereafter. The immediate increase would result from fewer comparatively healthy people signing up if the individual mandate penalties were eliminated.
Beginning in 2020, the increased average premiums from the individual mandate penalty repeal would be expected to be offset by grants to states for the Patient and State Stability Fund, which pulls high-cost patients out of the general insurance pools and intends to limit the costs to insurers of enrollees with very high claims.
CBO also noted that while average premiums would be expected to increase prior to 2020 and being to decrease starting in 2020, the changes in premiums would significantly different for people of different ages, compared to the current law. Under the proposed legislation, insurers would be able to charge five times more for older enrollees than younger enrollees, compared to three times more under the current law.
ACA Rules Expected to Remain in Effect
Under the proposed legislation, some aspects of the current law would not be changed. Insurers would still be required to accept all applicants during open-enrollment periods and could not deny coverage based on enrollee’s preexisting health conditions. Additionally, insurers would still be required to cover specified categories of health care services, and annual and lifetime maximum benefits would continue to be prohibited.
The CBO Report is available here. A detailed King & Spalding Client Alert summarizing the American Health Care Act and its prospects for passage is available here.
Seema Verma Confirmed As CMS Administrator And Is Already to Work
On March 13, 2017, the Senate confirmed Seema Verma as CMS Administrator, and on the same day, HHS sent a letter to State Governors, urging them to apply for State Innovation Waivers on State experiments for risk pools and reinsurance plans, to help improve access to insurance coverage. On March 14, HHS Secretary Tom Price and Administrator Verma sent a second letter to State Governors, noting their commitment to a “new era for the [F]ederal and [S]tate Medicaid partnership where [S]tates have more freedom to design programs that meet the spectrum of diverse needs of their Medicaid population.”
In the March 14 letter to State Governors, the new administration pledges to empower States to design programs that meet the “spectrum of diverse needs of their Medicaid population,” allow for more expedient approval processes related to Medicaid waiver requests, and encourage employment among Medicaid beneficiaries.
Administrator Verma’s plans have received quick opposition from House Energy and Commerce Committee and Senate Finance Committee Democrats in a March 14 letter stating that the new plans work counter to the goals of the Medicaid program.
Administrator Verma is known for leading the reform of the Indiana Medicaid program and worked with a number of State insurance agencies and public health agencies as they prepared for the changes implemented pursuant to the Affordable Care Act.
