On June 22, the Senate Republicans released the Better Care Reconciliation Act of 2017 (“BCRA”), their version of a bill to repeal and replace the Affordable Care Act. The bill repeals some provisions of the ACA. However, in many instances the bill retains the ACA framework, but dramatically reshapes provisions of the ACA. Here are some of the key provisions of the bill:
• The bill eliminates the penalty tax imposed on employers who do not offer affordable coverage, effective 1/1/16. However, the bill does not eliminate the reporting obligations associated with employer-sponsored coverage. Similarly, the bill eliminates the penalty tax on individuals who do not maintain health insurance coverage, but retains the tax reporting provisions of ACA regarding individual coverage.
The reporting requirements remain necessary because the ACA framework (of granting tax credits for those without employer sponsored coverage) has been retained.
• The bill retains the ACA’s framework of providing tax credits to help individuals purchase health insurance—but makes dramatic changes to the operation of these credits:
‣ Credits will now vary based on income and age—with greater subsidies for older individuals. Under BCRA the subsidies stop when an individual’s income reaches $42,210 (350 percent of the 2017 federal poverty level of $12,060).
‣ Credits are not available if the individual has any health coverage available from his or her employer.
‣ The bill also redefines the “benchmark” plan used to determine the amount of an individual’s subsidy.
‣ The bill repeals, effective after 2019, the subsidies under ACA that provide help with out-of-pocket costs.
These are very technical changes and it will take some analysis to really assess how different individuals will be affected.
• The bill revises the maximum premium that can be charged to older individuals. Under BCRA carriers can charge older individuals up to 5 times the amount charged to younger individuals (under the ACA the cap is 3 times). However, BCRA also specifies that the maximum charged to older individuals can be capped at “such other ratio” as each state may determine.
• The bill repeals or delays the new taxes levied under ACA, including:
‣ The “Cadillac” tax on high-cost health plans (repealed for period after 12/31/19 until 12/31/25; reinstated after that);
‣ The 2.3% tax on medical devices (repealed effective after 12/31/17);
‣ The additional 0.9% Medicare tax on joint income over $250,000 (repeal effective after 12/31/22); and
‣ The 3.8% tax on investment earnings for those with joint income over $250,000 (repeal effective after 12/31/16).
• The bill contains a variety of provisions to make health savings accounts more attractive, including a significant increase in the amount that can be contributed to an HSA each year and loosening a number of other HSA rules.
• The bill gives states the ability to obtain a waiver of many other provisions of the ACA, including the requirement that insurance plans cover essential health benefits. The federal government must grant a waiver unless it is demonstrated that the waiver will increase the federal deficit.
• The bill also creates new rules for health plans sponsored by associations, franchisors or similar entities. These plans will be governed by federal rules and exempt from state insurance regulation.
The bill attempts to sidestep many of the criticisms levelled at the House bill. For example:
• The tax credit available to help individuals pay for health insurance better recognizes differences in income and age.
• Provisions of the House bill that threatened those with preexisting conditions have been removed from BCRA.
• Other controversial provisions (such as changes to mandated “protected health benefits”) are not directly changed by BCRA; rather, the ability to modify these provisions is offered to individual states.
It is expected that this bill will change as the legislative process plays out. However, we now have insight into what is at stake under the Senate’s version of “repeal and replace.”