On June 22, 2017, the U.S. Senate introduced a bill to repeal and replace the ACA. The bill, called the Better Care Reconciliation Act (BCRA), is the Senate’s response to the American Health Care Act (AHCA), which the House passed back in May. In introducing the BCRA, Senate Majority Leader Mitch McConnell said he anticipated a vote on the BCRA before Congress’s week-long Fourth of July recess. It now appears that the vote won't happen until after the break. Because the bill is a reconciliation bill, it requires only a majority of senators to approve in order to pass the Senate — although it’s unclear whether there’s enough Republican support in the Senate to achieve a majority.
The BCRA makes some of the same ACA changes as does the AHCA. Those include repealing the ACA’s individual and employer mandate penalties, health FSA contribution limits and health insurance tax. It also includes several changes to HSAs: amending HSA contribution limits to align with the HSA-qualifying HDHP out-of-pocket maximums, allowing reimbursements from an HSA that are incurred after HDHP enrollment but prior to the HSA’s establishment, and allowing catch-up contributions from both spouses to the same HSA. Similar to the AHCA, the BCRA allows reimbursements from HSAs, FSAs and HRAs for over-the-counter (non-prescription) medications and delays the so-called “Cadillac tax” until 2026. Those similarities to the AHCA would likely be viewed as welcome by employers, since they reduce administrative requirements on reimbursement accounts and either relax or completely do away with some employer compliance obligations (like the need to track hours, run measurement periods and offer affordable coverage to full time employees under the employer mandate).
That said, in other areas, the BCRA has significant differences from the AHCA. For example, while the AHCA replaces the ACA’s premium tax credits (PTCs) and cost-sharing subsidies with refundable tax credits based on age, the BCRA retains the ACA’s PTC basic structure, with some significant differences on eligibility and amount. To begin with, the BCRA makes PTCs available to individuals with incomes between zero and 350 percent of the federal poverty level (FPL) (the relative percentages are 100 and 400 percent under the ACA). In addition, the BCRA adjusts the benchmark plan for subsidy awards to a cheaper, skinnier plan (58 percent actuarial value, compared to the ACA’s 70 percent benchmark plan) with the median premium cost of all qualifying health plans in the rating area (rather than the second-lowest cost silver plan under the ACA). Under the BCRA, PTC qualification still depends on whether the employer, if any, offers coverage to the individual. That means employer reporting of offers (via IRS Form 1095-C) may still be required, since the government would need to know whether that offer was made to determine PTC eligibility. While the government may simplify reporting going forward, employers can expect the reporting to continue in the future, even under the BCRA. Lastly, along the lines of PTC eligibility, the BCRA adds an additional layer of verification for individuals applying for advance payment of the PTC. Specifically, the BCRA requires the exchange to verify an individual’s identity with the Social Security Administration prior to advance payment of the PTC, whereas the ACA allows the advance payment prior to the verification. (The House also recently passed a bill related to verifying an individual’s identity prior to advanced payment of the PTC [SB 2581, linked below], which is contingent upon the AHCA’s passage into law.)
As far as other comparisons between the AHCA, BCRA and ACA, the BCRA doesn’t allow insurers to apply a surcharge (or potentially, where there’s a state waiver in place, apply medical underwriting) to an individual with a lapse in coverage, as does the AHCA. Instead, through a revision introduced to the bill on June 26, 2017, the BCRA would lock out from coverage for six months those individuals that have a lapse in coverage for 63 or more days. Although they address it differently, the AHCA and BCRA include these provisions to provide an incentive for individuals to enroll in coverage without an immediate medical event or need. This is crucial to maintaining stability in the individual market.
Like the AHCA, the BCRA doesn’t eliminate the ACA’s pre-existing condition exclusion prohibitions or essential heath benefit (EHB) requirements. Both the AHCA and BCRA would allow states to waive out of the EHB requirements and come up with their own version of EHBs, but the BCRA’s waiver process appears to be broader than the AHCA in an attempt to give states even more flexibility in designing plan requirements.
Much of the debate over the BCRA will be directed at Medicaid and the Medicaid system and the individual market (reinsurance and individual high-risk pools and stabilization). On Medicaid, the BCRA phases out ACA Medicaid expansion between 2021 and 2024 and then proposes even deeper cuts (as compared to the AHCA) beyond that. The BCRA also allows states to impose a work requirement on non-disabled, non-elderly, non-pregnant adults as a condition to receiving Medicaid coverage. The BCRA does retain some of the AHCA’s provisions relating to Medicaid, though, including the idea of using block grants as the means for federal support. On the individual market, the BCRA proposes a few new ways to help stabilize the market with respect to high-risk individuals. While the Medicaid and individual market discussion doesn’t directly impact employers, it does impact them when considering the overall health care delivery and payer ecosystem: What impacts the individual market may impact the Medicaid market, which may impact the employer group market. In addition, the Medicaid discussion goes a long way in determining whether the BCRA will actually pass the Senate. This obviously impacts the other BCRA provisions above that directly impact employers.
CBO Report Released
On June 26, 2017, the Congressional Budget Office and Joint Committee on Taxation (collectively the CBO) released their cost estimate regarding the BCRA. According to the report, the number of Americans uninsured would grow by 22 million in 2026 under the BCRA, 1 million less than the number reported in the CBO related to the AHCA. The deficit is projected to decrease by $321 billion over the same period, a significant difference compared to the $119 deficit reduction reported as to the AHCA.
Impact on Employer Plan Sponsors
Until both the House and Senate pass a final ACA repeal and replacement bill, and until the President signs it into law, the ACA remains the law of the land. That means employers should continue their compliance efforts across the board, including compliance with the employer mandate and associated reporting. As always, we’ll continue to monitor developments and provide updates as things develop.
Better Care Reconciliation Act »
HR 2581 »
CBO Report »