Executive Summary of the Better Care Reconciliation Act of 2017 (“BCRA”)

Quick Jump
I. Introduction
— Table Comparing the ACA, AHCA, and BCRA
II.  Individual Insurance (Marketplace Plans)

A.  Individual Mandate
B. Premium Subsidies (Tax Credits)
C. Age Ratings
D.  Changes to the Way Insurance is Marketed and Benefits Conferred
E. Essential Health Benefits for Marketplace Plans
F. Coverage for Pre-Existing Conditions

III.  The BCRA and Employer-Based Insurance
IV. Medicaid: What Happens Next

A. Medicaid Expansion
B. Medicaid Funding
C. Essential Health Benefits For Medicaid Enrollees
D. Work Requirements for Medicaid
E. Retroactive Eligibility and Presumptive Eligibility

V. Miscellaneous Taxes
VI. State Waivers for Some ACA Provisions
VII. State Stability and Innovation Program
VIII. Abortions and Planned Parenthood
IX. Economic Analysis of the Bill

 

Any changes related to the various amendments will be specified in the below summary.  For standalone summaries of the amendments, visit the following pages:
— July 13th Amendment

In addition, several smaller amendments have been added to the BCRA that do not have corresponding standalone pages.  The changes from those amendments will be indicated below.

 


I. Introduction

After the House of Representatives passed the American Health Care Act of 2017 (“AHCA”) on May 4, the Senate began work to pass its own version of the bill.  While in theory the Senate could have attempted to pass the House version of the AHCA, the bill was unlikely to acquire the necessary 50 votes, given its unpopularity amongst the public and the dismal report from the Congressional Budget Office (“CBO”).

On June 22, 2017 Senate Republicans released the Better Care Reconciliation Act (“BCRA”).  Health policy experts and the larger public have criticized the Senate throughout the bill drafting process in large part due to the secrecy around the bill.  Many Republicans, including some on the working group, reported that they did not have an opportunity to see the bill before it was released to the public.  Senate Republicans also drew criticism when they sent the bill to the CBO for scoring before releasing any of its text to the rest of the Senate or the public.  Additionally, many have remarked on the fact that no women were invited to the 13-member group that worked on the draft.  

The BCRA was immediately met with opposition from three Republican senators who stated the bill did not go far enough in repealing the ACA, and one senator who stated concern about the impact of the bill to individuals reliant on Medicaid.  Over the next week, more senators declared their opposition to the BCRA.  Without these votes, the Senate bill cannot pass.  In an attempt to draw votes from these holdout senators, the Senate released an amended version of the bill four days after the bill’s initial release.  

Below is a summary of the key provisions of BRCA and how it compares to the Affordable Care Act (“ACA”).  You can read the entire bill here (updated as of June 26, 2017).  You can view the official section-by-section summary from the Committee on the Budget here (updated as of June 26, 2017).

For a comprehensive summary of the House bill (the AHCA), read our summary here.

 

The July 13th Amendment and the Cruz Amendment:

On June 13, 2017, Republican Senate leaders released an amendment (“July 13th Amendment”) to the Better Care Reconciliation Act (“BCRA”) intended to persuade holdout Republican Senators to vote for the bill.

The July 13th Amendment incorporates many suggestions made by Senator Ted Cruz, including what is referred to as “the Cruz Amendment.”  In the private market, the Cruz Amendment would allow insurers to offer minimal coverage plans that do not comply with Affordable Care Act (“ACA”) requirements so long as the insurer also made available at least one gold plan, one silver plan, and one bronze plan (which would have a lowered 58% actuarial value under the BCRA).  

The July 13th Amendment also makes some minor changes to Medicaid.  First, it would allow states to apply block grant fundings for the Medicaid expansion population.  Secondly, under the amendment, the bill would also allow states to exceed block grant caps in the case of a public health emergency.

Any changes related to the July 13th Amendment will be specified.

Our summary of the July 13th Amendment without the rest of the BCRA can be found here.

 

The July 20th Version of the BCRA:

On July 20, 2017, the Senate released a new version of the BCRA and sent it to the Congressional Budget Office (“CBO”) for scoring.  This version of the BCRA incorporates the July 13th Amendment with the exception of those provisions related to the Cruz Amendment.

 

 

The July 25th Portman Amendment:

On July 25, 2017, Republicans amended the BCRA during debate of the bill to include both the Cruz Amendment and the Portman Amendment.  The Portman Amendment would increase funding for the State Stability and Innovation Program from $19.2 billion a year to $30.2 billion a year, totaling in $100 billion in new funding.  This amendment comes after Senator Portman expressed concerns about the BCRA not providing enough funding for the opioid crisis.

Shortly after the Portman Amendment was introduced, the Senate voted on whether it and the Cruz Amendment (packaged alongside the rest of the BCRA) fulfilled procedural requirements, though it was largely understood that the vote represented whether Senators supported the amendments.  With a 57 to 43 vote, it failed to pass.  However, Republicans may attempt to introduce it alongside another version of the bill.

 


The chart below compares key consumer provisions under the the ACA to the proposed legislation in the House and Senate.

 

ACA AHCA BCRA Potential Effects
Individual Mandate Yes.  Everyone must be insured or pay a penalty. In 2016, the penalty was 2.5% of total income or $695 per person, whichever was higher.   No.  There is no individual mandate. However, there is a one-time 30% surcharge for individuals with >63 days gap in coverage.

Retroactive to 2016.

No.  There is no individual mandate, nor is there any other penalty.

Update (6/26): If an individual does not have insurance for 63 days, then no coverage for 6 months. Retroactive to 2016.

Update with the July 13th Amendment (7/13): If applying during open enrollment, an individual must have no gaps in coverage longer than 63 days over the last year.

If applying under special enrollment, an individual must have either the above OR at least 1 day of coverage during the 60-day period immediately preceding the submission of an application.

If the individual has had a gap under either of the preceding circumstances, then they cannot have coverage for 6 months.  Policy applies beginning in 2019.

Under either AHCA or BCRA, “adverse selection” will likely result in higher premiums overall
Tax Credits/ Insurance Subsidies Income-based subsidies for individuals between 100% and 400% FPL; geographic location and premium increases taken into account. Amounts do not vary by age. Tax credits based primarily on age (ranging from $2,000 for individuals <30 years to $4,000 for individuals 60 yrs & up). Credit reduced by 10% of excess income above $75K per person or $150K per dual filers. Maintains ACA tax credits based on income and premium increases but lowers eligibility level for subsidies from 400% FPL to 350% FPL.

Does not allow premium tax credits for consumers with any offer of employer coverage.

Update with the July 13th Amendment (7/13): Prohibits tax credits for small business employees who get help from their employers to purchase coverage on the individual market.

All consumers could use tax credits to purchase catastrophic plans starting in 2019.

Reduces the number of people eligible for subsidies; increases out of pocket costs, particularly for older Americans
Essential Health Benefits (“EHBs”) All insurance plans must cover 10 EHBs, including plans in  the Medicaid expansion States can seek a waiver of this requirement. Removes EHB requirement from Medicaid expansion plans as of 2020. States may seek a waiver of this requirement for plans on the individual market.

Update with the July 13th Amendment (7/13): The Cruz Amendment permits states to waive the EHB requirement for insurers, so long as they also offer other plans that include EHBs.

Insurers can offer plans without real benefits; may impact lifetime or annual limits for employer sponsored plans
Employer mandate Yes. Employers with >50 employees must offer health insurance No. Employers with >50 employees are not required to offer health insurance. Retroactive to 2016. No. Employers with >50 employees are not required to offer health insurance.Retroactive to 2016. CBO estimates that this could cause 4 million people to go without insurance.
Age Ratings 3:1

(Prohibits insurers from charging older individuals more than 3 times what they charge younger individuals)

5:1

OR states may obtain a waiver to determine any other ratio

5:1

OR states may obtain a waiver to determine any other ratio

Older Americans will end up paying significantly more for health insurance
Changes to Marketing Insurers are required to label offerings by metal tier: Bronze, Silver, Gold, & Platinum. Tiers indicate to consumers how much is covered by insurance versus what is out of pocket (in addition to premiums) Lowest plan (bronze) must have an AV of 60% (meaning consumer responsible for 40% of costs) Repeals metal tier system with no alternate plan for consumers to understand average out of pocket costs when comparing plans. Plans can be sold that cover less than 60% of all costs Bronze plans must cover at least 58% AV

Update with the July 13th Amendment (7/13): The Cruz Amendment permits states to waive the EHB requirement for insurers, so long as they also offer at least one gold plan (80% AV), one silver plan (70% AV), and one bronze plan (58% AV).

Lower up front premium but higher out of pocket costs for healthcare
Pre-Existing Conditions Patients cannot be denied insurance coverage on this basis; community ratings prohibit charging more to a person based on pre-existing condition People with pre-existing conditions must be covered but states can seek waivers that allow insurers to charge more based on health status. Maintains the ACA’s rules on pre-existing conditions, but states could waive the Essential Health Benefits requirement which could eliminate coverage for certain services  that people with pre-existing conditions rely upon

Update with the July 13th Amendment (7/13): The Cruz Amendment permits states to allow insurance companies to consider pre-existing conditions when charging customers, as long as they also offer plans that do not consider pre-existing conditions.

May substantially increase costs for those with certain health conditions
Medicaid Expansion Expanded coverage to nondisabled adults with incomes  <133%FPL Ends the Medicaid expansion as of 2020 Does not directly end the Medicaid  expansion, but gradually reduces federal funding from 2021 to 2023. Some states that expanded Medicaid would automatically end the expansion when federal dollars get reduced As a result of these cuts to the Expansion, the CBO estimates 14 million fewer insured under the AHCA by 2026.  For the BCRA, the CBO estimates that 21 million fewer would be uninsured compared to the ACA.
Medicaid Funding Continued historical funding method of federal government matching state spending dollar for dollar without caps Allows states to choose block grants or per-capita caps as method of receiving federal matching funding; federal funds would no longer be tied to actual state spending needs;

federal increases based on the medical care component of the consumer price index

Allows states to choose block grants or per-capita caps; federal funds would no longer be tied to actual state spending needs;

federal increases based on medical care component of the consumer price index starting in 2021 and then switching to standard inflation starting in 2025.

Update with the July 13th Amendment (7/13): In an attempt to garner more moderate Republican votes, this amendment allows states to apply block grant funding for the Medicaid expansion population.  States can also exceed the block grant caps in the case of a public health emergency.

States will be forced to cut benefits or eligibility for Medicaid enrollees
Young adults <26 Can stay on parents’ plan Can stay on parents’ plan Can stay on parents’ plan No change

 


II.  Individual Insurance (Marketplace Plans)

The BCRA would change several key features of the ACA that would decrease consumers’ access to insurance, change the scope of their coverage, and alter the way they shop for plans.  The Senate bill does not technically “repeal” the ACA, but rather modifies it substantially.


A.  Individual Mandate

A key provision of the ACA (and one that was hotly contested) is the law’s “individual mandate” requirement.  This provision requires most individuals to obtain health insurance or pay a penalty for refusing to do so.  In 2016, the penalty was 2.5% of total income or $695 per person, whichever was higher.  You can read more on the ACA’s individual mandate here.

The goal of the ACA’s individual mandate and associated penalty is to discourage individuals from purchasing insurance only when they know they are likely to need medical services, and dropping it when they are healthy.  This phenomenon, known as “adverse selection,” results in the insured population being sicker than the general population, which can drive up the cost of the plans.  The individual mandate and the associated penalty aim to prevent adverse selection and to spread the risk of high medical costs across as much of the population as possible.  This also creates a broader base of premiums from healthy individuals to help support sick individuals in their time of need.  The ACA’s protection for those with pre-existing conditions is only possible if enough healthier people are in the pool.

Updated Version of BCRA (June 26, 2017)

Although the BCRA initially would have removed the individual mandate without applying a penalty, the Senate has since updated this portion of the bill.  Starting in 2019, the BCRA would impose a penalty on those who had a break in continuous insurance coverage for 63 days or more in the prior year.  These individuals would be subject to a six month waiting period before coverage begins.  Consumers would not have to pay premiums during the six month period.  This may encourage some healthier individuals to enroll, but may also have the negative effect of keeping sick individuals out of the marketplace or forcing them to seek more expensive emergency care.

 

The July 13th Amendment and the Cruz Amendment:

The July 13th Amendment slightly changes the way the government would enforce the individual mandate.  Beginning in 2019, there would be a lookback period for individuals applying for insurance.  Those that apply during open enrollment periods could not have any gaps in coverage longer than 63 days over the previous year.  Individuals seeking coverage under special enrollment would need to either fulfill those same requirements or have at least one day of coverage during the 60-day period immediately preceding the submission of an application.

If an individual could not fulfill these requirements, he or she would be denied coverage for six months starting from the first day of the month that they applied for insurance.

Note that minimal coverage plans offered under the Cruz Amendment would not qualify as coverage for the purposes of the Individual Mandate.  However, the amendments state that any person that wishes to immediately move from a Cruz Amendment plan to an ACA-compliant plan during open or special enrollment periods may do so.

 

 


B.  Premium Subsidies (Tax Credits)

Prior to the ACA, individuals who did not qualify for Medicare or Medicaid, were not insured by an employer, and could not afford individual insurance (or were barred from purchasing due to a pre-existing condition) often went without health coverage at all.

Thus, the ACA aims to make individual insurance more affordable.  To do so, the ACA offers income-based subsidies in the form of a tax credit to enable individuals to purchase health plans in the Healthcare Marketplaces.   Based on individual and family income, the ACA’s subsidy program also takes geographic location and premium increases into account.  The ACA allows anyone earning up to 400% Federal Poverty Level (“FPL”) to be eligible for these subsidies.  For more information on the subsidy program generally, you can visit the Henry J. Kaiser Family Foundation website.

Similar to the ACA, the BCRA bases tax credits on income level.  However, it also takes age into consideration like the House’s AHCA.  The BCRA would allow anyone earning up to 350% of the Federal Poverty Level (“FPL”) to be eligible for tax credits, down from the ACA’s 400% cap.

The amount an individual would receive would increase as they aged.  However, the BCRA would change the calculations for premium tax credits so that the required income percentages vary with age and with income.  Even though older people would receive larger premium tax credits than younger people with the same income, they would pay the same amount for the benchmark plan.  As a result, on average, younger people would pay a lower share of their income to purchase a benchmark plan than under current law, and older individuals would pay a higher share.  Additionally, although older individuals would receive more in tax credits under BCRA than under the AHCA, fewer middle-income people would receive them, and those that would, would receive less money.  For further explanation of how the BCRA changes the structure of these tax credits and how they affect different age groups, visit Kaiser Family Foundation’s website.

The Senate bill also changes the ACA subsidies in another important way by tying the subsidies to the lowest, bare minimum plans available.  Under the ACA, subsidies were based on the purchase price of the second tier (silver) plan.  The BCRA ties the subsidies to the lower level plan with much higher deductibles.  Thus, individuals receiving subsidies would be expected to purchase the plan with the least coverage and the highest deductible, and would ultimately pay more out of pocket for healthcare.

In addition, the proposed law prohibits consumers and small businesses from receiving tax credits if they purchase a plan that covers abortions where the mother’s life is at risk or where abortion is the result of incest or rape.

 

The July 13th Amendment and the Cruz Amendment:

The Cruz Amendment provides that states may allow insurers to offer minimal coverage plans that do not comply with many of the ACA’s requirements.  These requirements include essential health benefits, actuarial value (“AV”), out-of-pocket limits, guaranteed issue, preventive services coverage, and protections for those with pre-existing conditions.  However, if states permit insurers to offer these plans, they would need to also offer at least one gold plan, one silver plan, and one bronze plan (which would have a lowered 58% AV under the BCRA).

Under the BCRA, the new benchmark level for determining premium tax subsidies would be set to the 58% AV.  This means that minimal coverage plans under the Cruz amendment would not qualify for tax credits, as they would be well below the 58% AV.  However, individuals may use health savings accounts to pay for these plans’ premiums.

The amendment also provides that if insurers do not offer a plan that meets the 58% AV level, the Secretary of the Treasury may structure premium tax credits based on plans with higher actuarial values.  However, as Timothy Jost writing for the Health Affairs Blog points out, insurers are required to offer 58% AV plans if they also offer minimum coverage plans under the Cruz Amendment.  As such, it is unclear how this would work.

The BCRA does not allow premium tax credits for consumers with any offer of employer coverage.  The July 13th Amendment goes further and prohibits tax credits for small business employees who get help from their employers to purchase coverage on the individual market.

Under the July 13th Amendment, all consumers could use tax credits to purchase catastrophic plans starting in 2019.  Under the ACA, individuals could only purchase these plans if they could not afford coverage or were under 30 years old.

 

 


C. Age Ratings

Prior to the ACA, health insurance companies could charge Americans aged 50-64 significantly more for health insurance on the individual market.  In some states, older Americans were charged five times more for health insurance than the amount charged to younger Americans.  As a result, many Americans in this age group went without health insurance.

With passage of the ACA, insurance companies could not charge older Americans more than three times the rate charged younger people for health insurance. This provision was a significant reason for the nearly 50% drop in uninsured adults aged 50-64.

The BCRA would increase the age rating from 3:1 to 5:1, meaning insurers could charge older adults five times what they charge younger adults.  Starting in 2018, states would also have the opportunity to apply for a waiver that would allow insurers to charge older Americans at other ratios.  Some states could charge older adults more than the five times what they charge younger Americans; the bill does not cap the amount.

Older Americans would see their premiums rise if age ratings were raised to 5:1 or higher.  According to an analysis by Standard & Poor, older Americans would see a premium increase of approximately 30% if age ratings were increased to 5:1.  As a result, this would significantly increase the number of uninsured individuals in this age group as older Americans would be unable to afford the premiums.


D. Changes to the Way Insurance is Marketed and Benefits Conferred

The proposed BCRA would affect how consumers shop for individual insurance plans on the marketplace by making it more difficult to determine what particular plans cover and changing the benefits covered by the different plans.

Under the ACA, plan issuers are required to label their offerings by metal tier: Bronze, Silver, Gold, and Platinum.  These tiers are based on the actuarial value (“AV”) of the plans, which are the average covered costs versus the out-of-pocket cost to consumers.  Under the ACA, plans range from 60%-90% AV with bronze plans at an AV of 60%.  This means that an average consumer can expect to be responsible for 40% of their medical costs for services covered by the plan, over and above the premiums.  The higher the tier, the lower the consumer’s out-of-pocket cost will be for each benefit.  Under a platinum plan, for example, a consumer will typically be responsible for only 10% of the costs of all benefits under the plan.  Naturally, the higher the tier chosen, the higher the premium will be.

The BCRA leaves the ACA’s metal tiering system in place, but changes the AV rating for the base plan.  Bronze plans would now have a 58% AV rating (instead of a 60% AV under the ACA).   This means a consumer would be responsible for paying slightly more in out-of-pocket costs.  In addition, the BCRA changes the value of the plan used to determine premium tax credits.  Under the ACA, premium tax credits are based on the cost to purchase a silver plan with an AV of 70%. The BCRA changes this to link tax credits to the cost to purchase a bronze plan with an AV of 58%.

 

The July 13th Amendment and the Cruz Amendment:

The Cruz Amendment provides that states may allow insurers to offer minimal coverage plans that do not comply with many of the ACA’s requirements.  These requirements include essential health benefits, actuarial value (“AV”), out-of-pocket limits, guaranteed issue, preventive services coverage, and protections for those with pre-existing conditions.  However, if states permit insurers to offer these plans, they would need to also offer at least one gold plan, one silver plan, and one bronze plan (which would have a lowered 58% AV under the BCRA).

Under the Cruz Amendment, if state law permits, insurers could offer plans below 58% AV when charging customers, so long as they also offer at least one gold plan (80% AV), one silver plan (70% AV), and one bronze plan (58% AV).

 

 


E. Essential Health Benefits for Marketplace Plans

Under the ACA, all insurance plans offered on the exchanges and all Medicaid plans in expansion states must cover ten categories of essential health benefits (“EHBs”).  The ACA defines ten broad categories of services as EHBs:

  1. Ambulatory patient services;
  2. Emergency services;
  3. Hospitalization;
  4. Maternity and newborn care;
  5. Mental health and substance abuse disorder services, including behavioral health treatment;
  6. Prescription drugs;
  7. Rehabilitative and habilitative services and devices;
  8. Laboratory services;
  9. Preventative and wellness services and chronic disease management; and
  10. Pediatric services, including oral and vision care.

The ACA requires these EHBs in order to prevent insurers from selling policies that have minimal or nonexistent coverage.  According to the Center on Budget and Policy Priorities, prior to the ACA, “62 percent of individual market consumers had plans that didn’t cover maternity care, 18 percent had plans that didn’t cover mental health treatment, 34 percent had plans that didn’t cover substance abuse treatment, and 9 percent had plans that didn’t cover prescription drugs.”

The BCRA would allow states to waive the EHB requirement in the individual market.  In some states, this may mean that insurers could offer policies with significantly less coverage.  As the New York Times has pointed out, this may result in meaningless coverage — a person with a pre-existing condition might be able to purchase insurance, but the insurance may not cover services for their condition.

Residents of states that choose to redefine EHBs may also end up losing other protections as well.  Under the ACA, insurers can no longer impose lifetime or annual limits on any benefits that qualify as EHBs.  However, because the ACA only bans lifetime limits on “essential health benefits,” if a policy does not contain benefits designated as essential in that state, a lifetime limit would apply to it.

This could ultimately affect employer-based plans as well as individual marketplace plans because of the way the ACA set up the EHB requirement.  Large group employer plans would not have to comply with the ACA’s EHB requirements except when covering catastrophic costs.  Rather, employers offering large plans (which often cover employees in multiple states) can choose to apply whichever state’s EHB requirements they like.  If a large employer wants to avoid covering maternity benefits, it could simply choose to adopt the EHB definitions in a state that does not include maternity benefits as an essential health benefit.  The Brookings Institution, a nonprofit organization that provides high level analysis of public policies, has a detailed explanation of how allowing states to redefine EHBs would affect both individual and the employer based insurance.

 

The July 13th Amendment and the Cruz Amendment:

The Cruz Amendment provides that states may allow insurers to offer minimal coverage plans that do not comply with many of the ACA’s requirements.  These requirements include essential health benefits, actuarial value (“AV”), out-of-pocket limits, guaranteed issue, preventive services coverage, and protections for those with pre-existing conditions.  However, if states permit insurers to offer these plans, they would need to also offer at least one gold plan, one silver plan, and one bronze plan (which would have a lowered 58% AV under the BCRA).

The Cruz Amendment permits states to waive the EHB requirement for insurers, so long as they also offer at least one gold plan, one silver plan, and one bronze plan that includes EHBs.

 

 


F. Coverage for Pre-Existing Conditions

Prior to the ACA, insurance companies could refuse to provide coverage to individuals with pre-existing conditions, impose lengthy waiting periods before coverage started, or exclude coverage for a pre-existing condition.  In addition, insurers were free to charge those individuals significantly more for health coverage than individuals without pre-existing conditions.  In one study from Kaiser Family Foundation, researchers estimate that about 27% of Americans under age 65 have health conditions that would bar them from coverage in the individual market if the ACA provisions are repealed.

The ACA changed the rules on pre-existing conditions for plans beginning in 2014 or later.  Insurers can no longer refuse coverage to individuals with pre-existing conditions, nor can they charge more to an individual simply because of a pre-existing condition.  By doing so, the ACA eliminated a significant barrier that many individuals, such as those with diabetes, heart disease, or even pregnancy, met when trying to purchase individual health insurance.  This is one of the most popular provisions of the ACA, with a 69% approval rating.

Another way the ACA ensures that individuals are not negatively-affected by a pre-existing health condition is by prohibiting health plans from setting premium rates based on health status.  The ACA contains a community rating provision that requires insurance companies to set premiums so that all individuals pay the same rate without regard to health status, age, gender, or lifestyle.  In other words, under the ACA, insurance companies cannot charge someone a higher premium because they have a pre-existing condition.

The BCRA would not directly change the ACA’s policy on pre-existing conditions.  However, by allowing states to waive EHBs, out-of-pocket limits, and AV requirements, insurers may have leeway to offer fewer covered benefits in their plans.  Individuals with pre-existing conditions could obtain insurance but discover that their plan does not cover the types of services they need for those conditions.  Alternatively, insurance companies could simply raise out-of-pocket costs.  For example, if an individual has a mental illness and a state has allowed an insurance company to drop mental illness from their plans or charge higher prices, then that mental illness has essentially become a pre-existing condition.

 

The July 13th Amendment and the Cruz Amendment:

The Cruz Amendment provides that states may allow insurers to offer minimal coverage plans that do not comply with many of the ACA’s requirements.  These requirements include essential health benefits, actuarial value (“AV”), out-of-pocket limits, guaranteed issue, preventive services coverage, and protections for those with pre-existing conditions.  However, if states permit insurers to offer these plans, they would need to also offer at least one gold plan, one silver plan, and one bronze plan (which would have a lowered 58% AV under the BCRA).

The Cruz Amendment permits states to allow insurance companies to consider pre-existing conditions when charging customers, as long as they also offer at least one gold plan, one silver plan, and one bronze plan that meet the ACA’s requirements for pre-existing conditions.  In other words, in some plans, insurers would have the option to increase the cost of premiums for consumers with pre-existing conditions as long as they offer other plans that do not.

 

 


III.  The BCRA and Employer-Based Insurance

The BCRA, like the AHCA, would completely remove the ACA mandate that required employers with 50 or more full time employees to provide health insurance for all employees.  The tax penalty for large employers that do not provide health benefits would be reduced to zero and retroactively enforced to January 1, 2016.  According to the CBO’s analysis of the bill, this would result in about 4 million fewer individuals insured under employer-sponsored plans in 2018.


IV. Medicaid: What Happens Next

A. Medicaid Expansion

The ACA expanded Medicaid eligibility to all U.S. citizens earning less than 133% of the poverty level.  In 2016, this meant that a family of four with a household income of about $32,000 was eligible for Medicaid coverage.  The Medicaid expansion allowed approximately 10.8 million Americans to obtain coverage.  Although the ACA originally mandated that all states expand Medicaid, the Supreme Court determined in NFIB v. Sebelius (2012) that the federal government could incentivize, but not require states to expand their Medicaid programs.  As a result, 19 states chose not to expand their Medicaid program.  

The BCRA would continue the ACA’s enhanced Medicaid expansion funding until 2021 and then gradually end it out over three years.  States would receive 85% in federal matching for Medicaid costs in 2021, 80% in 2022, and 75% in 2023.  In 2024, the federal matching rate for the expansion population would fall to the matching rate for other enrollees.  According to the CBO report on the BCRA, this rate depends on the state, ranges from 50% to 75%, and averages about 57%.  Many states would be unable to afford the costs of the Medicaid expansion by 2024.  Furthermore, several states would be forced to end the Medicaid expansion in 2021 due to built-in trigger clauses within their state legislation.  These trigger clauses would end the expansion as soon as federal matching rates go below the ACA’s 90% federal matching rate.


B. Medicaid Funding

Currently, the states and federal government share the cost of Medicaid, meaning that the federal government matches state spending on qualified Medicaid expenditures dollar for dollar.  Under this open-ended funding scheme, the amount the state receives from the federal government is determined by actual costs rather than projected ones.  For instance, if there is an epidemic or natural disaster that increases health needs, state Medicaid programs can respond and federal payments automatically adjust to match that change.  An excellent explanation of how Medicaid is currently funded can be found here.

Under the BCRA, starting in 2021, the federal government would no longer match state spending on Medicaid programs.  Rather, the bill would establish a per capita cap model that would limit federal spending to a set amount per state Medicaid enrollee without consideration of the state’s actual needs or costs.

Annual federal contributions would be based upon a state’s actual costs for 2016.  At first, the federal government would increase its contributions based on the medical care component of the consumer price index and the share of Medicaid enrollees in different beneficiary categories (such as disabled, aged, or children).  However, starting in 2025, the federal government would increase its contributions based on the standard inflation rate rather than the medical care component of the consumer price index.  Since the standard inflation rate is much lower than the consumer price index medical care component, states would likely need to make cuts to enrollment and/or benefits.

Starting in 2020, any state with spending higher than their specified targeted aggregate amount would receive reductions to their Medicaid funding for the following fiscal year.  Thus, if a state has a natural disaster that requires increased and unanticipated Medicaid spending one year, they are essentially punished by having their federal share of money reduced the next year.

Additionally, under BCRA, a state could choose a block grant rather than a per capita cap to fund its for non-elderly, non-disabled, non-expansion adult populations.  States choosing a block grant would be given considerable flexibility in determining which populations they would cover and the services they would provide to them.  The amount of block grant funding would be calculated by multiplying the per capita cost for the eligible population by the number of enrollees the state had in the year prior to adopting the block grant.

The funding would increase by the growth in the consumer price index from 2021 through 2024 and in 2025 by the standard inflation rate.  However, neither rate would adjust for changes in population. Thus, even if more individuals qualify for Medicaid in a given state during a given year, that state would receive no extra money to cover those costs.  Unused funds would rollover and remain available for expenditure so long as a state has a block grant.

The BCRA excludes blind and disabled children, those who receive Indian Health Care services, breast and cervical cancer patients, and children covered by the Children’s Health Insurance Program (“CHIP”) from the block grant formula.  However, this may prove difficult to enforce in practice.  According to some experts, it would “be difficult or impossible to protect any beneficiaries from the effects of the per capita cap structure, because states would receive fixed federal payments and have to make tough choices about cutting eligibility, benefits and payments to providers.”

 

The July 13th Amendment and the Cruz Amendment:

In an attempt to garner more moderate Republican votes, this amendment allows states to apply block grant funding for the Medicaid expansion population.  States can also exceed the block grant caps in the case of a public health emergency.  However, this exemption only lasts from 2020 to the end of 2024 and provides a maximum of $5 billion for all emergency exemptions covered by the bill, which is unlikely to address all needs.  For further discussion of the public health emergency exemption, you can read Sara Rosenbaum’s article on the subject at the Health Affairs Blog.

 

 


C. Essential Health Benefits For Medicaid Enrollees

One of the goals of the ACA was to make sure that anyone who purchased health insurance was guaranteed coverage for some basic healthcare needs under their policy. Thus, the ACA requires all individual and small group plans to cover ten essential health benefits (“EHBs”).  The ACA also requires that all Medicaid insurance plans offered to individuals pursuant to the expansion also meet the EHB requirement.

These EHBs include ambulatory patient services (outpatient care), emergency services, hospitalization, maternity and newborn care, mental health services and addiction treatment, prescription drugs, rehabilitative services and devices, laboratory services, preventive services (including wellness services and chronic disease treatment), and pediatric services.  Requiring coverage for certain EHBs ensures that individual and small group plans offered a basic set of essential health services, some of which were frequently left out of these types of plans (such as maternity care).

The BCRA would eliminate the requirement for EHB coverage for the Medicaid expansion population starting in 2020.  States could define the EHBs that their Medicaid programs must offer in that state, just as they could pre-ACA.  In some states, this may mean that insurers could offer policies with significantly less coverage.  As the New York Times has pointed out, this may result in meaningless coverage — a person with a pre-existing condition might be able to purchase insurance, but the insurance may not cover their condition.

Cutting the EHB requirement from Medicaid expansion plans could pose problems for residents of states dealing with the opioid epidemic.  First, if the ACA’s ten EHBs are not required, expansion plans may no longer cover substance abuse and addiction treatment.  Second, the BCRA’s proposed changes to Medicaid funding would mean less money for states to combat the opioid crisis.  Although the BCRA would provide $2 billion to states in 2018 to address the opioid crisis, some critics argue that this is not nearly enough.  Specifically, some Republican senators are concerned that Medicaid cuts may strain their states’ ability to deal with this epidemic.  For instance, Ohio Senator Rob Portman has requested that, if the government cuts Medicaid, it should give states $45 billion over 10 years from a separate funding source.  In fact, Senator Portman has expressed that he will refuse to vote in favor of the Senate bill unless it contains funding for the opioid crisis.  However, this additional funding request may be met with opposition from other senators who are focused on cost savings.

 

The July 13th Amendment and the Cruz Amendment:

The July 13th Amendment also adds $45 billion to address the opioid epidemic.

 

 


D. Work Requirements for Medicaid

Both the BCRA and the AHCA would also allow states to institute a work requirement on non-disabled, non-elderly, non-pregnant adults as a condition of Medicaid coverage.  This requirement is modeled after similar requirements in the Temporary Assistance for Needy Families (“TANF”) program.  Activities that would satisfy the work requirement include:

– unsubsidized employment;
– subsidized private or public sector employment;
– on-the-job training;
– job search or readiness assistance;
– community service programs;
– vocational educational training;
– satisfactory attendance at secondary school or in a course of study leading to a certificate of general equivalence (as long as the recipient has not already completed secondary school or received a certificate);
– education directly related to employment (if the recipient has not received a high school diploma or GED); or
– providing childcare to an individual participating in a community service program.

Note that college and graduate studies do not appear on this list.

A state would not be allowed to impose a work requirement as a condition for Medicaid to the following:

– pregnant women;
– children under the age of 19;
– an individual who is the only parent/caretaker of a child under the age of 6;
– an individual who is the only parent/caretaker of a child with a disability; and
– an individual under the age of 20 who is married or is the head of the household and maintains satisfactory attendance at school or participates in education directly related to employment.

The bill would grant broad flexibility to states to implement the work requirement as they see fit.

To ensure that states have the tools to implement the work requirement, the federal government would provide a 5% administrative FMAP bump to states who choose to implement a work requirement.

Many criticize the effectiveness of employing a work requirement, as most people on Medicaid already work or are caring for a child or disabled person.  For current statistics on employment rates for Medicaid recipients as under the ACA, read the Henry J. Kaiser Family Foundation’s issue brief on the employment status of Medicaid enrollees.


E. Retroactive Eligibility and Presumptive Eligibility

Since 1965, Medicaid has included retroactive eligibility as one of its key safety-net provisions.  Under current retroactive eligibility, individuals who apply for Medicaid may receive benefits for up to three months prior if they would have been eligible during that period had they applied.  This allows for indigent people to receive care even if they are not yet Medicaid enrollees.  If an individual receives health care and is later determined to be Medicaid eligible, because of retroactive eligibility, their care may not result in medical debt.  Viewed from a healthcare provider’s perspective, this means the care they provide to low income people will not go uncompensated.

Likewise, presumptive eligibility allows for hospitals and other trained qualified entities to determine if individuals are presumptively eligible for Medicaid on a case-by-case basis.  The ACA expanded presumptive eligibility from the children and pregnant women populations to also include all adults under the expansion population.  The healthcare industry has hailed this as an effective way to extend coverage to more people who need care.

The BCRA would shorten the retroactive eligibility period to one month rather than three.  The bill would also eliminate the extension of presumptive eligibility to the expansion population. The elimination of these protections would likely lead to increased debt for poorer individuals and uncompensated care for health care providers.  For further discussion of eligibility modifications and their impact, read Georgetown University’s Health Policy Institute’s article here.


V. Miscellaneous Taxes

The AHCA would repeal several ACA tax provisions, outlined in the table below:

 

Name of the ACA Tax House version Senate version Potential Effect
Cadillac tax

(Delayed until 2020)

Tax of 40% of the value of employer health benefits beyond a certain threshold (levied on insurers but cost will pass to consumers)

Delayed until 2026 Delayed until 2026 This tax never went into effect under ACA; if it goes into place in 2026, it could raise significant revenue.
Tanning tax

10% tax on indoor tanning services

Retroactively repealed to January 1, 2017 Repealed in October 2017 In 2015, IRS collected $78 million under this tax (less than anticipated); repeal of tax will reduce revenue
Branded prescription drug tax

Tax levied on manufacturers or importers of prescription drugs based on sales to federal programs

Retroactively repealed to 2017 Repealed in 2018 CBO report on BCRA estimates reduced revenue of approximately $24.8 billion from 2016-2025; shareholders and investors would be primary beneficiaries of repeal
Medical device excise tax

(suspended in 2016 & 2017, to restart 2018)

Tax (2.3%) on certain limited medical device manufacturers and importers

Retroactively repealed to January 1, 2017 Repealed in 2018 CBO estimates revenue loss of approximately $20 billion from 2016-2025.
Health insurance tax (Individual mandate penalty)

2.5% of household income or $695 whichever is higher

Retroactively repealed to January 1, 2017 Retroactively repealed to January 1, 2017. CBO estimates revenue loss of approximately $144.5 billion from 2016-2025. May lead to some premium savings but more likely benefit will pass to insurance companies.
$500,000 limit on business expense deductibility for compensation to insurance executives Retroactively repealed to January 1,2017 Retroactively repealed to January 1, 2017

Update with July 13th Amendment: This tax would remain in place.

Insurers have incentive to pay executives higher salaries because they can deduct more of it; but even under ACA, big insurance CEOs were paid an average of $14.6 million per year.

Update with July 13th Amendment: No change

Medicare tax imposed on unearned income on taxpayers earning more than $200,000 ($250,000 for joint filers) Retroactively repealed to January 1,2017 Retroactively repealed to January 1, 2017

Update with July 13th Amendment: This tax would remain in place.

Low and middle income earners pay taxes on all income; wealthy pay no taxes on “investment” income or income from standing wealth.

Update with July 13th Amendment: No change

Repeal of the ACA’s Medicare 0.9% tax surcharge on taxpayers with incomes exceeding $200,000 ($250,000 for joint filers) Retroactively repealed to January 1, 2017 Repealed in 2023.

Update with July 13th Amendment: This tax would remain in place.

CBO estimates revenue loss of $58.6 billion between 2017-2026 under BCRA. Medicare insolvency advanced by 3 years from 2028 to 2025.

Update with July 13th Amendment: No change

Prohibition against paying for over-the-counter drugs with tax-subsidized funds from Health Savings Accounts (HSAs), Archer MSAs, or flexible spending or health reimbursement arrangements Retroactively repealed to January 1, 2017 Retroactively repealed to January 1, 2017 CBO estimates BCRA repeal will result in over $5.6 billion loss of revenue
ACA’s increase in the penalty for the use of HSA and Archer MSA funds for non-medical purposes Retroactively repealed to January 1, 2017.

Reduces the penalty from 20% to 10% for HSAs and 20% to 15% for MSAs.

Retroactively repealed to January 1, 2017
Reduces the penalty from 20% to 10% for HSAs and 20% to 15% for MSAs
CBO reports minor loss of revenue (approximately $1 million)
$2500 limit on contributions to flexible spending accounts Retroactively repealed to January 1,  2017 Repealed in 2018 CBO estimates revenue loss of over $18 billion under BCRA
Limits on Retiree Drug Subsidy Deduction

 

Employers cannot deduct the amount of the Retiree Drug Subsidy received from the federal government

Retroactively repealed to January 1, 2017 Unclear from text of bill Not analyzed to date
Chronic care tax

Tax deductions allowed for medical expenses that exceed 10% of income

Modifieds tax to allow deductions for medical expenses that exceed 5.8% of income

Retroactive to 2017

Modifies tax to allow deductions for medical expenses that exceed 7.5% of income

Retroactive to 2017.

May lower costs for some because it allows non-preventative care to be covered by HSAs

 


VI. State Waivers for Some ACA Provisions

Under the ACA, a state can apply for a “state innovation” waiver (also known as a “section 1332 waiver”) that allows the state to opt out of certain provisions of the ACA for five year periods so long as coverage is not jeopardized and is budget-neutral.  States can seek waivers for a variety of requirements, including modifying the EHB requirements, premium tax credits, state marketplace requirements, and annual caps on benefits.  The waiver process is extensive under the ACA, and requires that a state demonstrate that its modified program will:

— provide comprehensive coverage equal to or better than what is required under the ACA;
— provide coverage and cost-sharing protections against excessive out-of-pocket;
spending that are at least as affordable as the ACA would require;
— provide coverage to at least a comparable number of its residents as the ACA would; and
— not increase the federal deficit.

States must also demonstrate that the program will include cost-sharing devices, incentivize quality and quality improvement, and encourage and allow consumer choice. The Department of Health and Human Services (“HHS”) and Treasury will only grant a state the waiver if the state has already passed legislation and has a program in place that can meet the requirements of the waiver.  Additionally, HHS and the Treasury have discretion to reject waiver requests that satisfy the statutory requirements should there be some adverse effect from the waiver.  As of February 2017, four states have applied for waivers since applications opened in January 2017, but the government has only accepted Hawaii’s request to operate its small business insurance program differently than under the ACA.

The BCRA would modify the process to obtain a waiver so that it would be much easier for states to obtain. Each application would need to include a description of how the state’s plan would replace the ACA’s requirements on cost-sharing and EHBs. It would also have to describe how the state would  “provide for alternative means of, and requirements for, increasing access to comprehensive coverage, reducing average premiums, and increasing enrollment.” Finally, the state plan could not increase the federal budget deficit. Some analysts have concluded that, taken with the rest of the bill’s language, HHS would not consider any factor other than budget or the purposes of waiver approval.  The bill would also eliminate HHS and the Treasury’s discretion to reject a waiver on other policy grounds.  Waiver approval would solely depend on demonstration that the program would not increase the federal budget deficit.

The BCRA includes a $2 billion fund, available from 2017-2019, to assist states in applying for and implementing plans pursuant to waivers.  The bill also includes an expedited process for obtaining waivers.  Finally, waivers under the BCRA would last eight years instead of five as under the ACA.


VII. State Stability and Innovation Program

Recognizing that the proposed health reform could affect the stability of the insurance market, the BCRA would create a fund called the State Stability and Innovation Program.  The Fund would receive $112 billion over 10 years and serve to prop up the market by covering costs of insurers, providers, and consumers who are hit with losses as a result of changes in the marketplace .  This fund is similar to the Patient and State Stability Fund (“PSSF”) contained in the House’s healthcare bill.

In order to qualify for these funds, a state would be required to file an application indicating its planned use of the funds.  The state can use the funds to do any of the following:

— establish or maintain a program to help high-risk individuals purchase health insurance, including through reduction of premiums on the individual market;
— establish arrangements with insurers to help stabilize premiums and promote enrollment in state insurance marketplaces;
— make payments to healthcare providers; and/or
— provide funding assistance to cover out-of-pocket costs for individuals purchasing plans on the individual marketplace.

In addition, in order to qualify for funds, a state would need to contribute matching funds starting at 7% of federal funds in 2022 and gradually increasing to 35% in 2026.  In addition, the states would have to use at least $5 billion from those funds each year to stabilize premiums and promote enrollment in state insurance marketplaces.

 

The July 13th Amendment and the Cruz Amendment:

The July 13th Amendment provides a total of $182 billion (an additional $70 billion) over ten years for the State Stability and Innovation Program.  The Cruz Amendment provides that this funding would be used to cover high-cost individuals, requiring HHS to pay these funds to insurers that offer ACA-compliant plans from 2020 to 2026.  Insurers would have to prioritize states that have both higher percentages of compliant plans and allow plans that waive ACA requirements under the Cruz Amendment.

The amendment also carves out a chunk of this money for Alaska, providing that 1% of the short-term stability funds that go to insurers and 1% of the long-term stability funds that go to the states are reserved for states where insurance premiums are at least 75% above the national average.

Additionally, the July 13th Amendment designates $45 billion from 2018 to 2026 for the opioid epidemic.

 

 

The July 20th Version of the BCRA:

The July 20th version of the BCRA does not incorporate the Cruz Amendment, and as such, changes how the government would divvy the funds for the the State Stability and Innovation Program.  The July 20th draft includes $70 billion in funding, but instead of requiring HHS to pay the funds, it leaves these funds with the states.

 

 

The July 25th Portman Amendment:

The Portman Amendment increased funding for the State Stability and Innovation Program from $19.2 billion a year to $30.2 billion a year, totaling in $100 billion in new funding. This amendment comes after Senator Portman expressed concerns about the BCRA not providing enough funding for the opioid crisis.

 

 


VIII. Abortions and Planned Parenthood

The BCRA would significantly restrict access to abortion in a variety of ways. First, it would alter the definition of a “qualified health plan” so as to prohibit consumers from receiving tax credits for any plan purchased on the individual marketplace that covered abortion care (unless the mother’s life is at stake or the pregnancy is a result of rape or incest).  Individuals may be unable to afford plans on the individual market without these tax credits and therefore are unlikely to obtain plans that offer abortion care.  BCRA would also eliminate the tax credit available to small employers that purchase health plans for their employees if the plan offered abortion coverage.  As a result, small business employers may refuse to provide health plans that cover abortion because they would lose tax credits.   

In addition, the BCRA would prohibit federal funding to “essential community providers” that provide abortions, such as Planned Parenthood, for a period of one year.  Currently, Planned Parenthood receives 75% of all its federal funds from Medicaid reimbursements for services provided to low-income women.  Under current law (the Hyde Amendment), Planned Parenthood and other essential community providers cannot use any of those federal dollars to provide abortion care.  The BCRA would take this even further and defunds Planned Parenthood entirely, even for services that are unrelated to abortion.

This could have significant and devastating results for women.  Approximately 2.6 million women receive some health care from Planned Parenthood annually.  This includes cancer screenings, contraceptive care, sexually transmitted infection screenings and treatment, as well as other primary care services.  In its recent analysis of the BCRA, the CBO concluded that cutting off funding to Planned Parenthood would result in loss of healthcare to many women and would result in increased births.  The CBO further concluded that many of these births would be of children who would qualify for Medicaid, thereby increasing Medicaid spending $77 million between 2017-2026.

At least two Republican senators have expressed concerns about the defunding of Planned Parenthood in the Senate bill.  Because the Senate can only afford to lose 2 GOP votes in order to pass the bill, defunding Planned Parenthood may prove to be a challenge.

 

The July 13th Amendment and the Cruz Amendment:

The July 13th Amendment prohibits consumers from using their Health Savings Accounts to pay for plans that cover “elective” abortion.  “Elective” abortion is defined as any abortion other than those necessary to save the life of the mother or terminate a pregnancy that is the result of rape or incest.

 

 


IX. Economic Analysis of the Bill

The CBO released its scoring of the BCRA on June 26, 2017.  Our executive summary of this report is forthcoming.

It also released a report on the AHCA as passed by the House of Representatives on May 4, 2017.  You can view our analysis of the CBO report on the AHCA here.