The American Health Care Act: A Public Policy Update

May 8, 2017 · Matt Brock

As you know, late last week the U.S House of Representatives passed the American Health Care Act (AHCA) on a 217–213 vote. We asked our Public Policy Team to break it down for us. Here’s the non-partisan skinny:

Subsidies & Mandates:

AHCA eliminates coverage and cost-sharing subsidies, and the coverage mandates on employers and individuals. Unlike the current subsidies, AHCA tax credits aren’t adjusted for income or geographic variations in premiums. To encourage continuous enrollment, it allows insurers to assess a 30% premium surcharge for people with coverage gaps of two months or more.

Essential Health Benefits (EHB) & Coverage Caps:

AHCA gives states the option to set their own EHBs—such as mental health, maternity, hospital and drug coverage—and set annual and lifetime coverage caps to lower premiums. One interpretation of this provision is that, if any state exercised this option, it would apply to all markets (individual, employer-based and group policies) in all states.

Community Rating:

AHCA lets states obtain waivers from “community rating,” which bars insurers from charging more for people with pre-existing conditions. Waivers would be reserved for states that set up a high-risk pool for people with costly conditions. AHCA provides $130 billion over 10 years for risk pools. It allows insurers to charge older customers rates that are five times higher (the ACA allowed rates to be three times higher). Insurers can charge higher rates in states that obtain waivers.

Medicaid:

AHCA phases out Medicaid expansion. States continue to get extra funding only for people enrolled before 2020; once expansion population individuals leave Medicaid, the higher funding for them stops. Beginning in 2019, federal funding for Medicaid would be fixed annually; states could choose between per capita caps or block grants indexed to medical inflation. In March, the Congressional Budget Office said this would reduce federal Medicaid spending by 25%.

Prevention:

AHCA eliminates a $1 billion prevention and public health fund, which is about 12% of the Centers for Disease Control and Prevention budget.

Reproductive Health/Planned Parenthood:

AHCA blocks Medicaid reimbursements to Planned Parenthood for one year. It also eliminates the use of federal tax credits to pay for insurance that covers abortion.

Taxes:

AHCA eliminates taxes created as part of the ACA: on insurers, medical devices, drug manufacturers and tanning bed salons, and on people earning more than $250,000 annually.

Unchanged ACA Provisions:

AHCA does not change ACA provisions on Medicare payment, quality, delivery and workforce reforms and fraud and abuse.

What’s Next:

AHCA faces broad opposition from the health care sector and from disease-specific and consumer groups. It is considered unlikely to advance in the Senate, which is expected to take at least a month (probably longer) to review and prepare amendments for deliberation. Senate Republicans are concerned about the proposed waivers for pre-existing and essential benefit provisions, the Medicaid restructure and the size and form of refundable tax credits. Senate Democrats oppose the bill unilaterally.

Although AHCA can pass the Senate with a simple majority because of the special rules for reconciliation, Republicans hold only a two-seat majority. This means they can afford no more than three dissenters, presuming Vice President Mike Pence would break a 50:50 tie.

That’s your update from the Hill and from the NCQA Public Policy Team! Stay tuned for further developments.