House Amends the American Health Care Act: Where Will It Lead?

Perkins Coie

On the last day before the U.S. Congress began its spring recess, the U.S. House of Representatives amended the now consolidated bill H.R. 1628, known as the American Health Care Act (the AHCA). We previously discussed the content of the AHCA prior to this amendment as well as how the AHCA was pulled from the House floor without a vote due to a lack of support. While many assumed the AHCA was dead as a result, it appears that, by amending the AHCA, the House may be trying to breathe new life into the bill.

The purpose of the amendment is to create a Federal Invisible Risk-Sharing Program (the Program) that acts as reinsurance to partially reimburse insurers in the individual health plan market for sicker insureds’ high-cost claims. The apparent rationale is that the Program will stabilize individual plan premiums by lowering the risk to participating insurers of such claims, which, in turn, would allow insurers to be less conservative in setting their premium rates and charge generally lower rates. Note that the Program operates differently than typical high-risk pools, which tend to isolate sicker insureds in a single plan. In the proposed Program, the high-risk individuals would continue coverage in the insurer’s plan along with other insureds, presumably in a more or less guaranteed issue market. 

The Program is similar to the reinsurance that was provided under the Affordable Care Act, but instead of being funded by insurers and third-party administrators of self-insured health plans, it would be funded almost entirely by the U.S. Department of the Treasury. The amendment designates $15 billion for the Program. It is doubtful that this funding will be sufficient to reduce premiums for sicker insureds in the manner intended, however, because the $15 billion is meant to cover a nine-year period, January 1, 2018 through December 31, 2026. This is in contrast to the Affordable Care Act’s reinsurance program that paid nearly that amount to insurers over two years (2014 and 2015), according to the Centers for Medicare & Medicaid Services’ (CMS) summary reports. 

The amendment does not address how the Program will be administered and lacks important details, such as which insureds’ claims will be considered eligible for coverage under the Program or at what attachment point reinsurance payments would apply and be subject to what limits. Instead, the amendment leaves the details to the U.S. Secretary of Health & Human Services (acting through CMS).

At this point it is difficult to know whether the amendment will result in meaningful support of the AHCA. We will have to sit back, make some popcorn and wait to see after Congress is back in session.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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