Feb. 24, 2017

Hours ago, a draft Republican bill to repeal and replace the Affordable Care Act through the budget reconciliation process was leaked to the public. The text of the draft can be accessed here. Our initial analysis is as follows.

Notably, the draft would cap the employee tax deduction for employer-sponsored coverage. The bill includes a formula that gives the Treasury Secretary authority to set the cap at an amount equal to the 90th percentile for plan cost. That amount would be set for 2019 and then adjusted by a COLA adjustment thereafter, meaning that if growth in medical care costs exceeds the COLA, this number will be insufficient in later years.

The proposal eliminates the individual and employer mandates by making the penalties $0 as of January 1, 2016.

The draft bill would repeal several of the ACA taxes and fees:

  • Cadillac tax as of 2020
  • PCORI fee as of 2020
  • Annual provider fee (immediate)
  • Medicare tax (immediate)
  • ACA net investment income tax (immediate)
  • Prescription drug tax (immediate)
  • Medical device tax (immediate)

The draft would replace individual subsidies with a tax credit that is tiered by age –

  • $2k per year for anyone under 30
  • $2.5k per year for 30-40
  • $3k per year for 40-50
  • $3.5k for 50-60
  • $4k for over 60

It also includes an overall aggregate subsidy limit for a family of $14k.

The tax credit is limited to individual market plans and to those individuals who are not eligible for a group health plan (including employer plans), Medicare, Medicaid or other government coverage.

With respect to HSAs, the bill would raise the contribution limit to the out-of-pocket cost for high deductible health plans and would allow spouses to make catch-up contributions to the same HSA.

The bill would eliminate the ability of HHS to define the scope of what counts as “essential health benefits” and instead, would allow each state to set its own benefits package. This means no “national benchmark plan” and likely no mandate reform.

Additionally, the draft bill expands grandfathered plan availability and limits some of the prior requirements to maintain that status. It also allows ACA subsidies for individuals through 2018, but between now and then: modifies some qualification requirements, eliminates the requirement that coverage be purchased through an exchange, and provides that purchases of individual grandfathered plans and plans that cover abortions would not be subsidy-eligible.

Other issues covered in the draft bill include –

  • Medicaid reform (repeal of the expansion, new benefit caps, conversion of some parts of the program to an “innovation grant” system)
  • Promotes continuous coverage by allowing health insurers to impose a premium penalty equal to the unpaid premiums for the prior 12 month period
  • Increases permissible age bands from 3-1 to 5-1 for the individual and small group markets

Please contact Joel Wood at joel.wood@ciab.com or Joel Kopperud at joel.kopperud@ciab.com with any questions.