On July 13, 2017, Senate Republican leadership released the latest version of the Better Care Reconciliation Act (summary of entire bill, including new amendment here) This post will address the private insurance sections of the amendment. A subsequent post by Sara Rosenbaum will discuss Medicaid changes.

The original draft of the BCRA was introduced on June 22, 2017. Senate Majority Leader Mitch McConnell had hoped to call a vote on the proposal before the July 4 recess. By late June, however, an unfavorable Congressional Budget Office report—which found that the bill would result in 22 million consumers losing health care coverage—and opposition from both conservative and moderate GOP Senators caused him to pull the bill for further negotiations.

The new amendment is intended to address some of the concerns of those who opposed the original draft. Senator McConnell reportedly hopes to hold a vote on it in the third week in July.

The Original Senate GOP Bill

To recap, the original BCRA repealed over a half trillion dollars in taxes on wealthy taxpayers and corporations imposed by the ACA, while phasing out the ACA’s enhanced federal funding for Medicaid expansion enrollees beginning in 2020. It also imposed a per-capita cap on federal Medicaid funding growth, beginning in 2020. It ended the ACA’s individual and employer mandate penalties.

The original BCRA repealed the ACA’s income- and premium-based tax credits beginning in 2020 and replaced them with income-, premium-, and age-based credits generally less generous than the ACA’s. The tax credits covered consumers with incomes below 350 percent of poverty—including consumers with incomes below 100 percent of poverty who are currently uninsured in Medicaid non-expansion states. The BCRA based the tax credits on the median premium of plans in the consumer’s rating area with an actuarial value of 58 percent.

The percentage of income that consumers had to spend before tax credits became available varied based on age, with older enrollees having to spend much more than is currently required and younger enrollees spending less. The permissible age rating ratio changed from 1 to 3 in the current law to 1 to 5.

The original Senate bill contained $50 billion in short-term funding paid directly to insurers to stabilize markets through 2020, as well as $62 billion in long-term funds paid to the states to stabilize markets and help individuals who could not afford coverage or health care. The BCRA funded the ACA’s cost-sharing reductions through 2019 and then repealed them.

On June 26, the BCRA was amended to impose a six-month waiting period on consumers who apply for coverage during open or special enrollment periods after having experienced a gap in coverage.

The original Senate bill amended the ACA’s 1332 state innovation waiver requirements to allow states to waive several ACA provisions, including most importantly the ACA’s required essential health benefits, without the procedural and substantive guardrails found in the ACA. It also sunset the ACA’s medical loss ratio requirements, leaving the states to decide whether insurers should have to spend any minimum percentage of their premiums on health care.

Changes In The New Version

The Cruz Amendment

The biggest change in the July 13 version of the BCRA is the Cruz amendment, a new section of the bill proposed by Senator Ted Cruz (R-TX), which would take effect in 2020. The Cruz amendment provides that an insurer could offer “skinny” plans that do not comply with ACA requirements in a rating area for a plan year, as long as the insurer certified to HHS that it would make available at least one gold plan (80 percent actuarial value), one silver plan (70 percent actuarial value), and one plan with an actuarial value of 58 percent (the new benchmark level for determining premium tax credits) in the entire rating period for the plan year.

Insurers offering the skinny plans could waive ACA requirements regarding essential health benefit, actuarial value, out-of-pocket limits, guaranteed issue, preventive services coverage, medical loss ratios, and prohibitions against health status underwriting and excessive waiting periods of more than 90 days for group plans. These requirements could only be waived if state law permits the waivers—the laws of many states would not currently permit the waiver of some of these provisions.

The skinny plans would also not participate in the ACA’s risk adjustment program, so risk would not be shared among insurers with respect to the skinny and ACA-compliant plans. The ACA’s single risk pool requirement does not appear on the list or provisions that can be waived. It is hard for me to imagine, however, how an insurer could effectively share risk between plans that complied with the ACA and plans that did not comply with the requirements and prohibitions that can be waived. The provision allowing waiver of the essential health benefits apparently would not apply to the ACA plans that cover members of Congress.

The July 13 amendment provides $70 billion for state stability funds. For the years 2020 to 2026, the Cruz amendment would require HHS to pay these funds to insurers that offer ACA compliant plans, prioritizing states that have higher percentages of rating areas with compliant plans and that allow waiver of the requirements that the Cruz amendment would waive under federal law. This might incentivize states to change their laws.

Premium tax credits would not be available for the Cruz amendment skinny plans, although taxpayers could use health savings accounts to pay for them (as long as the plans do not cover abortions, other than those necessary to save the life of the mother or in cases of rape or incest). Skinny plan coverage would not be considered creditable coverage for purposes of the BCRA’s six-month waiting period requirement, but the amendment permits a consumer to move from skinny to ACA-compliant coverage during open enrollment or a special enrollment period as long as the consumer moves from the one plan to the other without a gap in coverage.

States with skinny plans could use money they receive under the stability fund to reduce premiums for ACA compliant plans. States that received 1332 waivers could not use pass-through funding to assist enrollees in skinny plans or insurers that offer them. If no plans with an actuarial value of 58 percent are offered in a rating area with skinny plans, premium tax credits could be paid based on plans with higher actuarial values. (Since insurers are required to offer 58 percent plans if they offer skinny plans, it is not clear how this works). The Cruz amendment offers states with skinny plans $2 billion between 2020 and 2026 for the regulatory costs of implementing the provision.

Disallowance Of Premium Tax Credits For Recipients Of Employer Health Reimbursement Arrangement Contributions

The other changes of the July 13 amendment are far less significant. The original BCRA did not allow premium tax credits for consumers with any offer of employer coverage. The amendment would additionally not allow them for employees of small businesses who receive health reimbursement arrangement contributions from their employers for individual insurance coverage.

Catastrophic Plans—Loosening Payment And Participation Restrictions

The amendment would, on the other hand, allow premium tax credits to be used for the purchase of catastrophic plans. It would allow any consumer to purchase a catastrophic plan beginning in 2019. Under the ACA, only individuals under the age of 30 and those who could not afford other coverage could buy these plans. The amendment would also require health insurers to include their individual and small group enrollees in catastrophic health plans in their individual and small group single risk pools.

Money For An Unnamed State, But Not A State With No Nome

As mentioned above, the amendment adds $70 billion to the long-term state stability and innovation program, but the Cruz amendment repurposes this money to pay insurers for covering high-cost individuals. The amendment also provides that 1 percent of the short-term stability funds, which are paid to insurers, and 1 percent of the long-term stability funds, paid to the states, are reserved for states where insurance premiums are at least 75 percent above the national average. This apparently means Alaska.

Health Savings Accounts—A New Role In Paying Premiums

The July 13 amendment amends the health savings account provisions of the Internal Revenue Code to allow HSA funds to be used to pay for medical expenses of children under age 27 and to pay for premiums of high-deductible health plans that are not otherwise covered by tax credits, deductibles, or exclusions. The amendment also makes high-deductible health plans ineligible for HSAs if they cover abortions except where necessary to save the life of the mother or in cases of rape and incest. These changes apply as of 2018.

Tax Provisions—Keeping Some ACA Taxes

The original BCRA repealed the ACA’s Medicare unearned income (net investment) tax and Medicare tax surcharge on taxpayers earning more than $200,000 a year ($250,000 for joint filers), and its limit on the business deduction insurers can take for executive compensation. The amendment drops these three repeal provisions. The CBO estimated the unearned income tax repeal alone would result in $172 billion in lost revenue, so this change will improve the deficit reduction score of the bill.

Association Health Plans—Even Less Of A Role For State Regulation

The July 13 amendments make a number of changes in the BCRA’s association health plan provisions. These in general seem to reduce regulatory procedural requirements, and in particular seem to remove any role for state regulation with respect to the association plans. The National Association of Insurance Commissioners had expressed concern about the extent to which the original BCRA preempted state regulation of association coverage, but the amendment removes even a consultative role for the states. It would also allow professional employer organizations, firms to which employers can outsource employee management tasks, to sponsor association plans.

Substance Use Disorders

The amendment appropriates $45 billion from 2018 to 2026 for substance use disorder treatment and recovery support services and $250 million for research related to the opioid abuse crisis. It maintains appropriated prevention and public health funds for 2018.

Continuous Coverage Requirement

The July13, 2016 amendment incorporates the June 26 amendment imposing a six-month waiting period on consumers who fail to maintain continuous coverage, but includes health care sharing ministries as coverage that qualifies for the continuous coverage requirement. It also gives HHS the authority to waive the continuous coverage requirement in other situations.

Abortion Coverage

Finally, the amendment would impose a $100 per day per individual penalty on qualified health plans that fail to properly segregate funds used to pay for abortions that cannot be otherwise federally funded in separate allocation accounts under section 1303 of the ACA.

Still A Difficult Path Ahead

The July 13 amendments are already proving very controversial. They may lock down votes from conservative Senators, but are unlikely to make the bill any more popular with the public generally, and may well further alienate moderates. Republican senators Susan Collins of Maine and Rand Paul of Kentucky have already announced their opposition to the new version of the bill, so Majority Leader Mitch McConnell and his team must hold all of the remaining Republican senators to gain the 50 votes needed to approve the bill (with Vice President Pence’s tie-breaking vote).