Benefits are designed to be competitive recruitment tools that effectively reduce absenteeism, disability and chronic illness.
The efforts to “repeal and replace” the Affordable Care Act (ACA) have occupied a good deal of recent media attention. This should not come as a surprise, since the ACA’s repeal was one of the centerpieces of Mr. Trump’s campaign, and it has also been a staple of Republican campaigns and legislation for the past eight years. The U.S. House of Representatives has voted to repeal or cripple the ACA on 60 separate occasions during that time. (For an excellent summary of these efforts, please see the November 2016 paper, prepare by Stephen Redhead, Health Policy Specialist, and Janet Kinzer, Senior Research Librarian, Congressional Research Service, entitled Legislative Actions to Repeal, Defund, or Delay the Affordable Care Act.)
While the mantra “repeal and replace” has become ubiquitous with reference to the ACA, for important political, budgetary and procedural reasons, these are really two different concepts, with radically different consequences. “Repeal” has a very different political calculus than “repeal and replace.”
What an ACA Repeal Really Means:
Despite their campaign promises, Republican lawmakers lack sufficient votes to repeal the ACA outright. This would require 60 votes in the Senate; Republicans have 52. So they must instead rely on a special budget strategy—referred to as “reconciliation”—that permits them to repeal those provisions of the ACA that directly impact federal spending. Created by the Congressional Budget Act of 1974, reconciliation allows for expedited consideration of certain tax, spending, and debt limit legislation. In the Senate, reconciliation bills aren’t subject to filibuster. Because any controversial bills in the Senate tend to attract a filibuster, the Senate Parliamentarian reviews the bill and decides whether it qualifies for reconciliation. Under the so-called Byrd rule, reconciliation bills can only make legislative changes that affect the federal budget. A previous ACA repeal bill was approved for budget reconciliation, which passed by the Senate in December of 2015. The bill was vetoed by President Obama, however.
The ACA is a massive law with 10 titles and hundreds of provisions. Of these, it is the insurance reforms, the individual and employer mandates, and the exchanges/marketplaces that are the most well-known. But the ACA also includes Medicare reforms, workforce provisions, FDA approval of biosimilars, and the many other provisions.
Repeal – The Reconciliation Process
Of all of the ACA’s many provisions, the following items are those that can be addressed by reconciliation in a stand-alone “repeal” measure (i.e., that can pass be a simple majority in the Senate):
- Individual mandate penalty reduced to zero
- Employer mandate reduced to zero
- 40% excise tax on so-called Cadillac plans repealed (currently delayed until 2020). The excise tax may be replaced with a cap on the amount excluded from the employee’s income for employer-sponsored health plan coverage.
- Increase the dollar limit on flexible health spending account contributions for Section 125 cafeteria plans (currently set at $2,600 for 2017)
- Federal government subsidies for individuals to purchase exchange coverage reduced to zero (likely to be phased in over time)
- Federal government “risk stabilization” payments to insurance companies reduced to zero (likely to be phased in over time)
- Federal government payments to states adopting the optional Medicaid expansion reduced to zero, with Medicaid payments as block grants
A complete list of ACA provisions that are subject to repeal under the reconciliation process can be found in Table 3 of the Congressional Research Service paper cited above.
Replace – Requires 60 Votes
In contrast, the following items may not be repealed using reconciliation. This means that 60 votes will be required in the Senate to proceed:
- Coverage mandates for insured and employer self-insured group health plans:
- Coverage of adult children to age 26
- Prohibitions on imposing:
- Preexisting condition coverage exclusions
- Waiting periods exceeding 90 days
- Annual and lifetime dollar limits on essential health benefits
- Reporting requirements (e.g., Summary of Benefits and Coverage)
- Other ACA insurance mandates (the full list is set out below)
- Additional ACA Requirements for Non-Grandfathered Plans:
- Coverage of preventive services without cost-sharing (the regulatory interpretation of “preventive services” as including contraceptive coverage is likely to be changed eventually by new regulations under a Trump Administration)
- Limits on employee cost-sharing
- Independent external review of denied claims for plans not already subject to IRO under state insurance laws
- Insurance Market Reforms
- Small employer insurance plans required to offer coverage of all ten essential health benefits
- The requirement to report the cost of employer-sponsored health plan coverage on Form W-2 cannot be repealed via budget reconciliation
Any attempt to repeal these provisions through normal legislative channels would be subject to a filibuster. Consequently, these provisions would remain in effect even if the ACA revenue provisions were repealed under a reconciliation measure. (A complete listing of the insurance market reforms is provided in the accompanying tables.)
Ignore – No Change
There is alternative to the handling of the ACA insurance market reforms, which are enforced through an excise tax penalty imposed on the employer. The Penalty is $100 per affected individual, per day, and it applies to any employer (regardless of the size of its workforce) that offers a group health plan that fails to comply with the ACA’s market reform requirements. Congress could reduce the excise taxes to zero. Or the the Trump Administration might adopt a non-enforcement policy regarding some certain market reform violations, but still enforce other popular market reforms (e.g., coverage of adult children up to age 26).
The “state of play”
There are currently at least five separate “repeal and replace” proposals. There are no stand-alone “repeal” proposals. Among other things, there is widespread concern that the repealing the ACA without providing a replacement would destabilize the insurance markets, and even lead to the collapse of the non-group market. The reasons for this collapse are explained in compelling fashion in a study by the Urban Institute, which claims that repeal of the ACA without replacement would devastate the non-group market “causing 7.3 million . . . people to become uninsured” as a result of three factors:
- Eliminating premium tax credits and cost-sharing assistance would make coverage unaffordable for many of the people currently enrolled, causing them to drop coverage. Those with the fewest health problems would drop their coverage fastest
- Eliminating the individual mandate penalty would reduce the incentive to enroll for healthy people who can afford coverage
- Insurers would remain subject to the requirement to sell coverage that meets adequacy standards to all would-be purchasers, and they would remain subject to the prohibition against charging higher premiums or offering reduced benefits to those with health care needs
While we find the Urban Institute’s analysis compelling, Congressional Republicans are almost certainly aware of this risk, and they may be prepared to appropriate funds necessary to stabilize the insurance markets pending passage of comprehensive ACA replacement legislation.
The impact of repeal and replace on Government programs (Medicare and Medicaid)
The ACA made some valuable, and correspondingly costly, changes to Medicare. Among other things, it expanded Medicare coverage to include certain preventive services, like mammograms or colonoscopies, without charging Part B coinsurance or deductible. In addition, the ACA phased out the prescription drug “donut hole.” Finally, the law took steps to ensure the Medicare program’s long-term solvency. All of this would be rolled back in the case of a full-blown ACA repeal. But at least one of the major replacement plans proposes to leave the ACA changes to Medicare intact. Presumably, this is a nod to popularity of the phase-out of the prescription drug donut hole.
One replacement plan (proposed by Rep. Paul Ryan) does not stop here. It instead proposes “transforming the [Medicare] benefit into a fully competitive market-based model using premium support.” Under the Ryan plan, beginning in 2024, Medicare beneficiaries would be given a choice of private plans competing alongside the traditional fee-for-service Medicare program on a newly created Medicare Exchange.
Medicaid is another matter entirely. The ACA vastly expanded the reach of the Medicaid program. The matter of Medicaid’s regulation post-ACA was further complicated by the Supreme Court’s ruling in 2012 that states were free to reject the ACA Medicaid expansion.
Before the ACA, Medicaid provided health care for children, pregnant mothers, the elderly, the blind, and the disabled.” The ACA expanded Medicaid’s reach to all low- income individuals. The Republican members of Congress roundly criticized this expansion, noting that the program’s expansion under the ACA accounts for more than 15 percent of all health care spending in the United States. This, they claim, is unsustainable.
The “Ryan” Plan’s approach to Medicaid is representative of the various “replace” proposals. Like the other plans, it makes radical changed to Medicaid that go well beyond mere repeal. This and the other plans offer two alternative approaches that states can elect: per capita allotment and block grants.
Per capita allotment
Under the per capita allotment approach a total federal Medicaid allotment would be available for each state to draw down on. The amount of the federal allotment would be the product of the state’s per capita allotment for the four major beneficiary categories—aged, blind and disabled, children, and adults—and the number of enrollees in each of those four categories. The per capita allotment for each category would be determined by each state’s average medical assistance and non-benefit expenditures per full-year-equivalent enrollee during the base year (2016), adjusted for inflation. The per capita allotment would be designed to grow at a rate slower than under current law.
Under the block grant option, a state that opts out of the per capita allotment could automatically receive a block grant of federal funds to finance their Medicaid program. States would then be free to manage eligibility and benefits generally as they see fit without the need to apply to the Department of Health and Human Services for waivers.
Individual and Group Market Reforms*
|Provision||Effective Date||Section Title/Heading|
|(1)||PPACA §1201, §10103(e); PHSA §2704||Plan years beginning on or after September 23, 2010||Prohibition on preexisting condition exclusions for enrollees who are under 19 years of age.|
|(2)||PPACA §1001, §10101(a); HCERA §2301(a); PHSA §2711||Plan years beginning on or after September 23, 2010||Ban on annual and lifetime dollar limits on essential health benefits. Applies to group and individual insurance markets, and group health plans, including grandfathered group and individual plans. Annual or lifetime limits are permitted for items and services that are not part of the essential health benefits.|
|(3)||PPACA §1001; HCERA §2301(a); PHSA §2712||Plan years beginning on or after September 23, 2010||Rescissions permitted only for fraud or intentional misrepresentation of material fact and with prior notice to the enrollee. Applies to group and individual insurance markets, and group health plans, including grandfathered group and individual plans.|
|(4)||PPACA §1001; PHSA §2713||Plan years beginning on or after September 23, 2010||Group and individual insurance contracts and group health plans (other than grandfathered plans) must cover the following preventive health services with no cost-sharing:
• Evidence-based items/services with a rating of “A” or “B” in the current recommendations of the U.S. Preventive Services Task Force (USPSTF).
• Immunizations recommended by the Advisory Committee on Immunization Practices of the Centers for Disease Control and Prevention (CDC).
• Evidence-informed preventive care and screenings provided for in the comprehensive guidelines supported by the Health Resources and Services Administration (HRSA) for infants, children and adolescents.
• With respect to women, additional preventive care and screenings provided for in guidelines supported by HRSA.
|(5)||PPACA §1001; HCERA §2301(a), §2301(b); PHSA §2714||Plan years beginning on or after September 23, 2010||Group health plans that provide dependent coverage must make coverage available to age 26. Grandfathered group health plans may delay to plan years commencing on and after January 1, 2014, for adult children eligible to enroll in an employer-sponsored plan.|
|(6)||PPACA §1001, §10101; PHSA §2715||Plan years beginning on or after September 23, 2010||Group health plans must provide summaries of benefits and coverage (SBC) explanation that meets standards developed by HHS.|
|(7)||PPACA §1001, §10101(d); PHSA §2716||Plan years beginning on or after September 23, 2010, but enforcement suspended (Notice 2011-1, 2011-2 I.R.B. 259)||Insured group health plans (other than grandfathered plans) must satisfy benefits-related non-discrimination rules under §105(h)(2) prohibiting discrimination in favor of highly compensated individuals in terms of eligibility and benefits.|
|(8)||PPACA §1001; PHSA §2717||Plan years beginning on or after September 23, 2010||Group and individual market policies and group health plan (other than grandfathered plans) must establish quality programs and report quality data to HHS and to enrollees during each open enrollment period. Required elements of a quality program include:
• Improve health outcomes through activities such as quality reporting, effective case management, care coordination, case management and medication and care compliance initiatives, including through the use of the medical home model.
• Implement activities to prevent hospital readmissions through a hospital discharge program that includes patient-centered education and counseling, comprehensive discharge planning and post-discharge reinforcement by an appropriate individual.
|(9)||PPACA §1001; PHSA §2718||Plan years beginning on or after September 23, 2010||Bringing down the cost of health care coverage: Health insurance issuers provide an annual accounting for coverage offered (including grandfathered health plans) and rebates to enrollees if medical loss ratios are not met.|
|(10)||PPACA §1001, §10101(g); PHSA §2719||Plan years beginning on or after September 23, 2010||Internal appeals/external review:
• Issuers in the group market and group health plans must have an internal claims and appeals process based on existing DOL claims and appeals procedures, updated by standards established by HHS.
• Non-group plans must have an internal claims and appeals process based on existing law, updated by standards established by HHS.External Review: Issuers in the group market and group health plans must comply with applicable state or federal external review requirements.
|(11)||PPACA §10101(h); PHSA §2719A||Plan years beginning on or after September 23, 2010||Group health plans must provide patient protections, including more choice of health care professionals, coverage of emergency services, and access to pediatric care and obstetrical or gynecological care.|
Health Insurance Market Reforms*
|Provision||Effective Date||Section Title/Heading|
|(1)||PPACA §1201; PHSA §2704||Plan years beginning on or after January 1, 2014||Prohibition on preexisting condition exclusions or other discrimination based on health status.|
|(2)||PPACA §1201; PHSA §2701||Plan years beginning on or after January 1, 2014||Fair health insurance premiums.|
|(3)||PPACA §1201; PHSA §2702||Plan years beginning on or after January 1, 2014||Guaranteed availability of coverage.|
|(4)||PPACA §1201; PHSA §2703||Plan years beginning on or after January 1, 2014||Guaranteed renewability of coverage.|
|(5)||PPACA §1201; PHSA §2705||Plan years beginning on or after January 1, 2014||Prohibiting discrimination against individual participants and beneficiaries based on health status.|
|(6)||PPACA §1201; PHSA §2706||Plan years beginning on or after January 1, 2014||Nondiscrimination in health care.|
|(7)||PPACA §1201; PHSA §2707||Plan years beginning on or after January 1, 2014||Comprehensive health insurance coverage.|
|(8)||PPACA §1201; HCERA §2301(a); PHSA §2708||Plan years beginning on or after January 1, 2014||Prohibition on excessive waiting periods.|
|(9)||PPACA §10103(c); PHSA §2709||Plan years beginning on or after January 1, 2014||Prohibition on denial of participation in approved clinical trials.|
Tables used with permission. © 2017 by The Bureau of National Affairs, Inc. (800-372-1033) http://www.bna.com2017.