On Tuesday, congressional Republicans introduced the American Health Care Act (AHCA), the reconciliation bill to repeal and replace provisions of the Affordable Care Act, and quickly moved to advance the legislation through the committee process. Following an 18-hour markup hearing and shortly after 4:00 a.m. on Thursday, the House Ways and Means Committee voted 23-16 along party lines to pass their committee-relevant elements of the bill. By Thursday afternoon, the House Energy and Commerce Committee voted 31-23 along party lines to pass their portions, following their own 27-hour markup hearing. The legislation now heads to the House Budget Committee where the various portions will be rejoined to form a single bill again, with a hearing scheduled for next Wednesday. Once that process is completed, the House Rules Committee will wrap up committee work, after which the bill can be considered on the House floor.
The AHCA retains many of the provisions of the leaked reconciliation bill, but with a few significant differences. One of which is that rather than capping the employer exclusion of health insurance at 90% of the plan’s actuarial value as the leaked reconciliation draft proposed, the AHCA would preserve the employer exclusion, but would add an additional five-year delay of the ACA’s Cadillac/excise tax until 2025—fifteen years after the ACA was enacted. That tax, a 40% excise tax on the amount of the aggregate monthly premium of each primary insured individual that exceeds the year’s applicable dollar limit, is currently set to take effect beginning in January 2020 following a two-year delay that was signed into law in December 2015. Many are concerned that retaining the tax, but again delaying it, would lead to the same problems as the Medicare Sustainable Growth Rate (SGR) formula, which was continuously delayed for 18-years until it was ultimately repealed in April 2015.
While the AHCA at least temporarily retains the Cadillac/excise tax, it would still repeal $600 billion in other taxes, including the ACA’s health insurance tax, medical device tax, net investment tax, Medicare wage surtax increase, and the tanning tax (fondly referred to as the “Boehner” tax). Therefore, the Cadillac/excise tax would be the sole pay-for remaining in the current iteration of the reconciliation bill, but even delaying it another five-years, as proposed, would cost the federal government $45 billion. NAHU strongly opposes both a cap on the employer exclusion and the Cadillac/excise tax and activated our Operation Shout grassroots system to send more than 9,300 messages to Congress to inform them on the importance of the exclusion. NAHU is also a member of the Alliance to Fight the 40 and the Don’t Tax My Health Care coalitions that have sponsored ads on morning news programs advocating for a full repeal of the Cadillac tax.
In place of the ACA’s advanced refundable tax credits, the AHCA would instead institute new age-adjusted and income based tax credits for individuals to purchase insurance on the individual market. Those would range from $2,000-4,000 and would begin phasing out for individuals with incomes above $75,000 and households earning more than $150,000, and completely phase-out for individuals earning more than $215,000 and joint-filers with incomes of more than $290,000. Tax credits would be permitted for catastrophic coverage and some off-exchange products. The bill would also repeal the ACA’s cost-sharing subsidies, which help offset out-of-pocket expenses for silver-tiered plans purchased through the marketplaces, for households with incomes up to 250% of the federal poverty level. Those subsidies are currently part of a lawsuit, House v. Price, which challenge their legal validity. In addition, the AHCA would phase out the ACA’s small business tax credit by 2020.
The AHCA would also eliminate the ACA’s individual and employer mandate penalties (although the mandates themselves would remain and compliance would be expected) and instead insurers would be allowed to increase premiums by 30% for anyone with a 63-day or more lapse in coverage. That penalty would be charged monthly and last for a full year. It would also reinstate high-risk pools, and fund them with $100 billion over the next 10 years ($10 billion per year) in a new “Patient and State Stability Fund” to expand coverage, increase insurance options, promote access to benefits, and reduce out-of-pocket spending. Other market reforms would include a repeal of the ACA’s actuarial value standards and would allow states to implement a 5:1 age-rating band structure instead of the current 3:1 standard.
Finally, the reconciliation bill would make significant changes to the Medicaid program, including the ACA’s Medicaid expansion. It would codify the 2012 Supreme Court decision that expansion is optional for states and would repeal the enhanced federal matching funds by 2020. It would also repeal the Medicaid disproportionate share hospital cuts for non-expansion states in 2018 and for expansion states in 2020. Non-expansion states would be given $10 billion over five years for safety-net funding. Individuals would be required to provide documentation of citizenship or lawful presence before obtaining Medicaid coverage, there would be an increased frequency of eligibility redeterminations, the mandatory income eligibility level for poverty-related children would revert back to 100% of poverty, and lottery winners would be ineligible for Medicaid based on a sliding scale. In a more structural change to the program, state funding would be changed to a per-capita cap model in 2020 based on fiscal year 2016 spending, which would then be indexed by medical inflation.
The markup hearings this week included dozens of amendments offered by both parties. Democrats offered amendments often in an effort to slow down the process, and Republicans offered amendments in attempts to sway the votes of more conservative members of the House Freedom Caucus, which counts nearly three dozen members of the House as members, and the Republican Study Committee, which counts 172 of the House’s 237 Republicans as members. Both groups came out last week in opposition to the previously released reconciliation draft saying they would not be able to vote for the bill without major changes. They were largely upset over the reconciliation bill’s proposal to replace the ACA’s income-adjusted tax credits to purchase health insurance with age-adjusted tax credits, claiming that doing so would create a new entitlement program by Republicans.
Democratic amendments ranged from an effort to expand the ACA’s small business tax credit, to one that would replace the AHCA’s title to “The Republican Pay More For Less Care Act,” and an amendment that would prohibit the bill from taking effect unless the Congressional Budget Office (CBO) certified that the AHCA would provide more affordable and better benefit healthcare than the ACA with fewer uninsured. There was also an amendment offered by Suzan DelBene (D-WA) to permanently repeal the Cadillac/excise tax. This amendment was notably voted down by party lines, with Democrats voting in favor and Republicans voting against, despite the previous bipartisan support for repealing the provision.
Among the biggest objections this week by Democrats and Republicans alike, was that the legislation was being presented without a “score” by the CBO—a determination of how much the legislation would cost the federal government, both in lost revenue and additional spending—as well as the non-transparent process for moving the legislation, claiming they did not receive the text with enough time to adequately prepare amendments before the markup hearings. A preliminary analysis of the bill by the Brookings Institution estimates that a CBO score would likely show a decline in healthcare coverage by at least 15 million Americans. An official CBO score is expected to be released in advance of the House Budget Committee’s hearing next Wednesday.
Republican Senator Tom Cotton (AR) was among the biggest critics of the lack of transparency in the process, releasing a series of tweets deriding the House for releasing the bill Monday night and starting voting on Wednesday without a budget estimate. He said that reforms shouldn’t be set by the House leaders' arbitrary legislative calendar and asked for them to start the process over again. The AHCA’s bill text was posted for public review on Monday with markup hearings beginning on Wednesday at 10:30 a.m. This contrasts to the ACA’s debate period in 2009, where House Democrats posted their bill text online 30 days in advance of the first markup hearing and accompanied it with a public CBO score the day it was formally introduced. At the time, now House Speaker Paul Ryan (R-WI) expressed frustration that “Congress is moving fast to rush through a health care overhaul that lacks a key ingredient: the full participation of you, the American people.”
The current AHCA bill could still see considerable change before it is ultimately passed by either chamber, given that it is being considered under the reconciliation process and not regular order. This allows the Senate, which ordinarily requires a super majority of 60 votes for passage of legislation, to only need a simple majority of 51 votes and avoid a filibuster. Likewise, the House would only need a simple majority of 218 votes of the chamber’s 535 members for passage. However, in exchange for this, the reconciliation process has significant restrictions on what may be included, with the requirement that items must pertain to government spending. This means that simple policy measures of the law that do not raise revenue or increase the federal budget would not be eligible for the reconciliation process but would need to be passed under normal order by both chambers, which is highly unlikely as there are only 52 Republicans in the chamber and there are few, if any, Democrats willing to cross the aisle to meet the 60-vote threshold for legislation to be passed under regular order.
If Republicans were to use regular order to pass legislation, they would need to win over every one of the centrist Democrats to their side in order to form a budget compromise, plus a few others, without losing any of the more conservative Republicans. That list of centrist Democrats generally includes: Joe Donnelly (IN), Heidi Heitkamp (ND), Tim Kaine (VA), Angus King (I-D, ME), Joe Manchin (WV) and Mark Warner (VA). Extending that list to less likely Democrat targets includes: Tom Carper (DE), Chris Coons (DE), Martin Heinrich (NM) and Claire McCaskill (MO). Additionally, winning over Patty Murray (WA), who is the ranking member of the Senate Health, Education, Labor and Pensions Committee, would be crucial for any agreement.
The difficulty in reaching bipartisan consensus (let alone Republican consensus) is leading congressional Republicans to use the reconciliation process instead, which while it has a more limited focus, only requires the simple majority of 51 senate votes. The Byrd Rule, named for the late-U.S. Senator Robert Byrd (D-WV), enumerates which items are eligible for the reconciliation process. There are six categories that would make a provision ineligible for the reconciliation process: it does not increase or decrease revenue or spending; it doesn’t adhere to specified instructions from the budget resolution; it is outside of the committee’s jurisdiction; the spending changes are incidental to the non-budgetary components; it increases the deficit beyond the years instructed through the budget resolution; or it makes changes to social security. While the House may technically pass legislation that doesn’t adhere to the Byrd Rule, the Senate cannot take up those provisions, making the House’s passage meaningless if the Senate isn’t able to follow suit. The interpretation for what can be included is left to the chamber’s parliamentarian.
The ACA was partially passed in 2010 using the reconciliation process. After an initial bill was passed by both chambers under regular order (Senate on 12/24/09, House on 3/21/10), President Obama signed that legislation into law on March 23, 2010. Two days later, the House and Senate each voted on a reconciliation package to make several budget-relevant changes to the law, which was then signed into law by President Obama on March 30, 2010. The initial bill had been passed when Democrats controlled 60-seats in the Senate, following the death of Senator Ted Kennedy (D-MA) in 2009 and with his interim replacement, Senator Ted Kaufman (D-MA), but prior to the election of Senator Scott Brown (R-MA) in January 2010. Brown’s election meant that Democrats would not have 60-votes to pass legislation under regular order without the support of Republicans, so they therefore had the House pass their bill as-is, then used the reconciliation process to make budget-relevant changes to the legislation.
The items that could potentially meet the requirements of the Byrd Rule and be included in a final reconciliation bill to repeal portions of the law include the bulk of the ACA’s taxes, including the Cadillac/excise tax, health insurance tax, medical device tax, Medicare payroll tax increase, and taxes on Health Savings Accounts, over the counter medications, and prescription drugs. It could also repeal the law’s advanced premium tax credits, cost-sharing tax credits and tax credits to territories, the small business tax credit, the individual and employer mandate penalties (though not the mandates themselves), and federal funding for Medicaid expansion (though not the state-optional expansion itself). NAHU is also advocating for a full repeal of the law’s Medical Loss Ratio requirement.
Besides the technical aspects of what can be included in the reconciliation bill to meet the Byrd rule, the legislation must also satisfy enough votes for passage. In addition to the challenges of pleasing the more conservative House groups, the Republican Study Committee and the House Freedom Caucus, while also not harming constituents currently enrolled in ACA coverage, the package must also win over enough support in the Senate where it can only afford to lose, at most, two votes (assuming that Vice President Mike Pence would cast the tie-breaking vote). Last week, Republican Senators Rand Paul (KY), Ted Cruz (TX), and Mike Lee (UT) raised objections, joining Republican Senators Shelly Moore Capito (WV) and Lisa Murkowski (AK), who both raised concerns over the bill’s plan to scrap the ACA’s Medicaid expansion. Murkowski also objected to plans to scrap funding for Planned Parenthood, along with Republican Senator Susan Collins (ME). The current AHCA bill includes language that would defund the organization.
House Speaker Paul Ryan (R-WI) has taken a firm stance on Republican defections, claiming “This is the closest we will ever get to repealing and replacing Obamacare,” and that it will be their one and only chance at gutting the law. Republicans have been wrangling over what to include in the reconciliation bill for weeks, which has led to some of the division within the party. Ryan said, “Members realize this is a once in a lifetime opportunity, so naturally people are saying, 'I’d love to have this in there,' and what people are learning is, this reconciliation stuff is pretty tight. That’s why you see a lot of confusion...this bill is written so that it can’t be filibustered.” After numerous objections were raised by several interest groups that passage of the current bill would dramatically destabilize the individual market, Ryan stated there are also plans to leave much of the market stabilization pieces of the ACA to the regulatory process, such as the market stabilization proposed rule NAHU commented on earlier this week . Ryan claims that the legislation will be passed by the House by the end of the month despite these objections.
In response to the new legislation, NAHU issued a press release expressing our appreciation that the bill does not include a tax on employer-sponsored health insurance and would retain many of the ACA’s consumer protections, such as guaranteed issue coverage, coverage of pre-existing conditions and keeping children on their parents’ policies until age 26. We also noted our support of several provisions of the bill that could help bring down health insurance costs and increase options for consumers, such as changes to HSAs, incentives for continuous coverage, allowing tax credits to be used for catastrophic coverage, expanding age rating bands and eliminating the Health Insurance Tax. However, we also expressed our disappointment that the bill does not permanently repeal the Cadillac/excise tax, but instead delays it until 2025.
Other industry groups had mixed reactions to the bill. The American Action Network, National Taxpayers Union and the Association of Mature American Citizens expressed support for the bill, while several others came out against it. This included numerous conservative-leaning groups like Heritage Action, the Cato Institute, Americans for Prosperity, FreedomWorks, Club for Growth, and Tea Party Patriots who did not support the legislation, many citing similar arguments as the Republican Study Committee and House Freedom Caucus that the bill would create a new Republican-led federal entitlement program. Club for Growth noted in a statement, “The problems with this bill are not just what’s in it, but also what’s missing: namely, the critical free-market solution of selling health insurance across state lines.” Ryan has addressed this provision, referencing the Byrd rule, and suggested that selling across state lines could possibly be included in a “Phase 2” or “Phase 3” of replacement since this could not be included in a reconciliation bill.
Unsurprisingly, more liberal-leaning groups such as FamiliesUSA came out against it, claiming that the bill would jeopardize the safety-net of more than 72 million low-income children, seniors, and people with disabilities. Other industry groups that also came out in opposition to the bill include: AARP, the American Hospital Association, the Federation of American Hospitals, the American Medical Association, American Nurses Association, American College of Physicians, American Academy of Pediatrics, the National Nurses United and National Physicians Alliance. Meanwhile, several insurer groups like AHIP and Blue Cross Blue Shield also expressed concerns over the bill, but did not release an official position.
Congress is scheduled to be in session through April 7, when it will take a two-week recess and reconvene on April 24 and largely remain in session until its August recess. Without any hiccups, the timetable for the reconciliation legislation currently has it being considered on the House floor at the end of this month. If passed, the Senate would need to take up the process through each of its committees of jurisdiction before passing it on the chamber’s floor. If there are any differences between the House and Senate versions, they can either have the opposite chamber pass their version as-is, or they can attempt to bridge their difference through a conference committee. This timetable would likely push any legislation well into May, although the goal of Republican leadership is to have the bill through the House and Senate by Easter.
As a reminder, until any legislation is formally enacted into law, the ACA remains the law of the land and all of its mandates, penalties, and enforcement remains in effect and your employer and individual clients should continue to follow all rules and regulations that are currently in place.