WHAT CHANGES DOES THE AMERICAN HEALTH CARE ACT MAKE?

On May 4, 2017, the U.S. House of Representatives passed the American Health Care Act (“AHCA”), designed to repeal and replace the Affordable Care and Patient Protection Act (the “ACA” or “Obamacare”.  The bill now goes to the Senate for its consideration.

As summarized by the Kaiser Family Foundation, following are some of the key features of the AHCA, if enacted into law:

1. The ACA individual mandate (the tax penalty imposed upon an individual for not having minimum essential coverage) would be repealed retroactive to January 1, 2016.
2. The ACA employer shared responsibility mandate (the tax penalties imposed upon large employers that do not provide minimum essential coverage or affordable coverage to employees and their dependents) would be repealed retroactive to January 1, 2016.
3. ACA premium tax credits would be modified for 2018-2019 to increase the amounts for younger adults and reduce the amounts available to older adults.  For 2020 and thereafter, ACA income-based tax credits would be eliminated and replaced with flat tax credits adjusted for age, with eligibility for new tax credits being phased out for individual tax filers with incomes of $75,000 per year and above ($150,000 and above for joint filers).  Annual credit amounts (payable monthly) would range from $2,000 per person through age 29 to $4,000 per person aged 60 or older.  Premium tax credits under the AHCA would not be available to those receiving Medicare or Medicaid or who are eligible for coverage under employer-provided group health insurance plans.
4. The ACA private market rules, including requiring guaranteed issue coverage, prohibiting preexisting condition exclusions, and requiring dependent coverage up to age 26, would be retained.
5. The health insurance marketplaces, with annual and special enrollment periods, would be retained.
6. A late enrollment penalty would be imposed on those who allow coverage to lapse.
7. The use of health savings accounts would be encouraged by increasing annual tax-free contribution limits and other provisions.  Effective January 1, 2018, the annual pre-tax contribution limit would be increased to equal the limit on out-of-pocket cost-sharing under qualified high deductible health insurance plans (in 2017, $6,550 for self-only coverage and $13,100 for family coverage).
8. The ACA requirement to cover ten essential health benefit categories would be retained, except that, beginning in 2020, states could apply for waivers to enable redefinitions of essential health benefits offered in individual and small group markets.  This provision would enable states to permit insurers to offer less costly health insurance plans that do not meet ACA essential benefit requirements.
9. A State Patient and State Stability Fund would be established, with federal funding of $130 billion over nine years, plus additional funding of $8 billion over five years for states applying for and receiving community rating waivers.  Under this program, a state could use these grant funds for such purposes as establishing high-risk pools, promoting access to preventive services, and providing assistance related to maternity coverage, newborn care, and mental health and substance abuse.
10. As part of the State Patient and State Stability Fund, a new reinsurance program called the “Federal Invisible Risk Sharing Program” (FIRSP) would be established to enable states to offset claims incurred by high-risk individuals covered by insurance companies participating in the FIRSP.
11. Coverage for abortions would not be required, and federal tax credits and FIRSP funds could not be used to pay premium costs for plans that cover abortions, other than abortions required to save the life of the mother or in cases of rape or incest (the Hyde amendment).  Nothing would prevent the insurer from offering or the insured from seeking coverage for abortions, provided that no premium tax credits or FIRSP funds could be used to provide or pay for that coverage.
12. Medicaid expansion would be a state option as of January 1, 2020.  The ACA option to extend coverage to adults above 133% of the federal poverty line (FPL) would be eliminated as of December 31, 2017, and the enhanced match up to 133% of FPL would be limited to states that had adopted Medicaid expansion as of March 31, 2017.   Moreover, federal funding for the enhanced match up to 133% of FPL would be eliminated as of January 1, 2020, except for grandfathered enrollees with no break in coverage who were enrolled through Medicaid expansion as of December 31, 2019.
13. Federal Medicaid financing would be converted to per capita caps beginning with fiscal year 2020.
14. A state option would be created to require work as a condition of eligibility for non-disabled, non-elderly, non-pregnant Medicaid enrollees as of October 1, 2017.
15. Federal funding for Planned Parenthood would be prohibited for one year from date of enactment.
16. There would be no change in Medicare benefit enhancements or provider/Medicare Advantage plan payment savings.
17. The Cadillac tax on costly employer-sponsored group health plans would be suspended for tax years 2020 through 2025.
18. A number of ACA taxes would be repealed, including:  a) the Medicare payroll tax on high-wage individuals and the 3.8% tax on unearned income for high-income taxpayers, effective January 1, 2023;  b) the tax on health insurers;  c) the tax on pharmaceutical manufacturers;  d) the excise tax on medical devices;  e) the provision prohibiting the cost of over-the-counter drugs from being reimbursed through health savings accounts;  f) the provision increasing the tax from 10% to 20% on HSA distributions not used for qualified medical expenses; and  g) the chronic care tax.
19. The annual limit on contributions to Flexible Spending Accounts (FSA’s) would be eliminated.
20. The income threshold for medical expense deductions on income tax returns would be reduced from 10% to 5.8%.