On Thursday, June 22, 2017, Senate Republicans revealed their draft revisions to the American Health Care Act of 2017 (“AHCA” or the “House bill”) which passed the House in May of this year. The Senate version was prepared by a 13-member working group led by Senate Majority Leader Mitch McConnell (R-KY). According to Senator McConnell, a vote on the bill could be held as early as next week.

The Senate version renames the law to the Better Care Reconciliation Act of 2017 (referred to herein as the “BCRA” or the “Senate bill”). Although the changes from the House version are not too drastic, there are a few key differences seemingly aimed at appeasing more moderate Republicans in the Senate.

Medicaid
Like the House bill, the Senate bill includes significant changes to the Medicaid funding mechanism, changing it from a program funded by a federal match of state-spend to a per-capita allotment. The Senate bill proposes to use a per-capita allotment to states beginning in 2021, which is two years later than the block grants were set to take place under the House version. The per capita amount would be set at total medical assistance expenditures for a state as the sum of the per enrollee amounts for five groups – the elderly, blind and disabled, children, expansion adults, and other adults – multiplied by the number of enrollees in each group. The allotment would grow based on the Consumer Price Index starting in 2025 (which grows slower than the House bill’s proposed medical CPI rate).

Individual Insurance Mandate 
Similar to the House bill, the Senate bill repeals the individual insurance mandate. But, while the House bill added a 30-percent surcharge to consumers who let their coverage lapse, the Senate bill initially did not include any incentive for healthy individuals to purchase insurance. Critics point out that without an incentive or mandate for healthy individuals to purchase insurance, the individual insurance market could become unstable and, potentially enter into a “death spiral.” Senate GOP leaders have since revised the bill by adding a provision that would impose a six-month waiting period before individuals who let their coverage lapse could re-enroll in insurance. 

Tax Credits
Unlike the House bill, the Senate bill provides tax credits based on income, age, and geography. In this manner, the Senate bill is akin to the Affordable Care Act, which also provided tax credits based on the same criteria. The House bill had tax credits based primarily on age. The Senate bill rolls back the income limit from what was included in the ACA, so in order to receive the credits individuals would need to be lower income than under the ACA.

Stability Fund
Likely due to its understanding of the “death spiral” concept, the Senate bill creates a stability fund for use by insurers that incur losses over the next 10 years. The House bill also included a stability fund, but it was for use by States to fund high risk pools and other costs.

Other portions of the House bill that remain intact:

• Elimination of employer mandate (requiring employers to offer affordable coverage to employees).
• Cost subsidies to insurers to help customers on the exchanges would end in 2020. 
•  Insurers can charge older adults up to five times more than younger adults. 
• Disproportionate Hospital Share (“DSH”) payments restored. The Senate bill restores the reductions to states not considered Medicaid expansion states during a given fiscal year.

Other portions of the ACA that remain intact:

• Young adults may stay on their parent’s health insurance plan until age 26.
• Insurance companies are not allowed to increase premiums or deny coverage based on preexisting conditions.

The Congressional Budget Office (CBO) released its estimates of the budget impact of the Senate bill on June 26, 2017. The CBO estimates that enacting the Senate bill would increase the number of people who are uninsured by 22 million in 2026 relative to the number under current law, which is a slightly smaller increase than that projected for the House bill. By 2026, an estimated 49 million people would be uninsured under the Senate bill, compared with 28 million who would lack insurance that year under current law. The CBO also estimates that enacting the Senate bill will reduce the cumulative federal deficit over the next decade by $321 billion, as compared to current law. That amount is $202 billion more than the estimated net savings from the House bill. Now that CBO has issued its report, AGG anticipates a vote as early as this week. Because Senate Republicans are using a special budget reconciliation process to avoid a Democratic filibuster, the bill can pass with a simple majority, or fifty (50) votes.

Arnall Golden Gregory will continue to monitor the BCRA and provide updates.