by Tom Younger, J. Smith Lanier
This will likely be one of a number of changes to the Senate’s Better Care Reconciliation Act (BCRA) as Senate leadership struggles to garner sufficient support to pass the legislation. But just for general interest, a new section to the bill was added this morning in an attempt to augment efforts to stabilize the individual policy markets. This new Section 206 provides that after Jan. 1, 2019, insurers offering plans on the individual market will be required to impose a 6 month waiting period on any applicant who in the past 12 months had a gap in credible coverage of 63 days or more. This would not apply however to the birth or adoption of a child when an application for that child is made within 30 days of the date of birth or date of adoption.
The rationale may not seem obvious, but many people learned to game the individual mandate penalty. Under those rules, a person is not subject to penalty unless he/she incurs a 90 day break in coverage; plus, insurers are required to accept all applicants with no questions asked. So, a person might buy a policy then let it lapse and reinstate it before the 90 days had run its course and repeat the cycle over and over – until he/she gets sick. In the end, the insurer is faced with claims liabilities for coverage for which it only collected a small portion of the premiums needed for adequate funding.
In another event, the Congressional Budget Office released its “scoring” of BCRA. The crux of the report is that BCRA will (i) reduce the federal deficit over the next decade by an estimated $321 billion (largely as a result of reduced Medicaid spending and repeal of cost-sharing subsidies); and (ii) will increase the number of uninsureds by the year 2026 by 22 million more than the current ACA.
These numbers looked familiar; and as it turns out they are. We mentioned a few months ago that the CBO reported the House bill, the American Health Care Act (AHCA), would leave 23 million more uninsured by 2026 than would ACA. Pretty close. But, then we went back a little further on the CBO website to the last time it scored a health bill. That was a bill passed by both chambers (largely symbolic) at the end of President Obama’s term (which he of course vetoed) – the Restoring Americans’ Healthcare Freedom Reconciliation Act of 2016. It would have fully repealed “Obamacare,” Medicaid expansion, premium tax credits, out-of-pocket subsidies – all assistance – with no replacement bill at all. Guess where CBO projected the additional uninsured number by year 2026 under this one – the same 22 million! We are admittedly confused. Are we to believe that the number of additional uninsureds would be unchanged whether a replacement bill is installed or not? Hard to figure….
After more concerted study of the Better Care Reconciliation Act, we wanted to clarify some points from our announcement Alert….
Preexisting Conditions. We mentioned a state opt-out provision, but that is actually not in the Senate version. Under the House bill, states could apply to opt out of the preexisting conditions prohibition if it establishes its own high-risk pool and demonstrates to HHS that their methodology will be better for the insureds. The Senate bill did not include this option. Resultantly, no change would be made to the current ACA rules on preexisting conditions, which has been a major talking point for opponents. Bear in mind that regardless of the political bantering, neither the House nor Senate bills repeal Obamacare but mostly make tax changes thereto. This is a tax reconciliation bill for the Senate. A repeal of ACA would require 60 votes. Thus, most of the market reform provisions of ACA will remain intact with only tax and revenue items amended.
Cadillac Tax. We reported that the Senate bill did not repeal the Cadillac tax – the 40% surcharge on health plans with premiums exceeding specified levels. We were partially correct (or wrong). The Cadillac tax has been delayed several times and now is scheduled to take effect in 2020. The Senate bill would allow it to hit in 2020 for five years but repeal it as of 2025.
Medicaid. We suggested that fewer people would be eligible for Medicaid as a result of BCRA. We noted upon further reading that current Medicaid beneficiaries would be grandfathered from the new rules. However, states would be allowed to re-check eligibility based on income every six months. Further, states would have an opt-out if they establish their own insurance plan for lower-income individuals and can prove to HHS that no gets hurt in the process. Medicaid spending will increase, yet a change in federal funds allocation would slow the rate of increase. Currently states are funded based on a percentage of claims. Under the rules proposed in the Senate bill, federal funds would be dispensed based on a per-capita allocation looking at the number of participants.
Individual Premium Tax Credits. We noted further that the ACA requirement to qualify for a premium tax credit of not being offered enrollment in an affordable, minimum value employer plan would be repealed as of the year 2020. Thus, anyone meeting the income thresholds could qualify for premium assistance irrespective of coverage offered at work.
Parenthetically, with the employer mandate penalty to be repealed…with the individual mandate penalty to be repealed…and with no need to certify that employees were offered coverage; we can find no reason IRS would want to continue any ACA reporting.
The Small Business Premium Tax Credit would be repealed as of 2020.
State Stability Program. The Senate bill would offer the states an opportunity to participate in this fund and receive additional federal funding. These funds must be used for the benefit of high-risk individuals not eligible for employer-provided coverage. Specifically, the funds could be used to reduce premiums (presumably by establishing a reinsurance pool to reimburse carriers above certain levels); and/or to reduce out-of-pocket costs. The kicker for the states is that if they apply for these funds, there would be a matching requirement beginning in year 2022 at 7 percent of the federal grant and increasing gradually to a 35 percent match by year 2026.
Small Business Co-ops. BCRA contains a provision that would allow the formation of small business cooperatives for the specific purpose of buying insurance for the member businesses; the theory being that much greater negotiation power would be available with insurers if there were several hundred or thousands of employees in the pool.
Status. We have nothing to go on other than the same news reports that you see. At this writing, five Republican senators will vote “no,” which means the bill does not pass. Rumor has it that an alternative bill is about ready to pop out in an effort to secure their approval.
Not everyone is an expert on health care reform. But the folks at J. Smith Lanier, one of our endorsed services providers, are. For this reason they created a publication called the Health Care Reform Alert. J. Smith Lanier has been providing these to its clients since 2010 when the bill was passed and now offers it to the members of ABA. It is J. Smith Lanier’s intention in the alerts to take the many pages generated by the Centers for Medicare and Medicaid Services, U.S. Department of Labor or Treasury and filter them down into terms that all can understand. For more information on how J. Smith Lanier can help your bank, contact Tom Younger at (256) 890-9027.