Repeal and Replacement of the Patient Protection and Affordable Care Act (ACA)

On January 12 and 13, 2017, the 115th Congress set the stage for the Trump administration by passing a budget resolution to repeal major provisions of the ACA with a simple majority vote.

On January 27, 2017, President Trump signed an executive order titled “Minimizing the Economic Burden of the Patient Protection and Affordable Care Act Pending Repeal,” to set in motion the repeal and replacement of the ACA.

This executive order directs the HHS Secretary and authorized heads of agencies to modify “any [ACA] provision…that would impose a financial burden on individuals, families….”

Four Republican Draft Bills Taking Aim at ACA Provisions

On February 2, 2017, the Health Subcommittee of the Energy and Commerce Committee in the House examined four Republican draft bills taking aim at repealing and replacing ACA provisions:

  • “Plan Verification and Fairness Act of 2017” (Blackburn, R-TN) – would require verification of eligibility for enrollment in ACA plans during special enrollment periods through documentation specified by the Secretary of HHS through interim final rulemaking; would require a study for year 2016 of individuals who attempted to enroll, and who were not allowed to enroll that is to be submitted to Congress by Inspector General of HHS by June 1, 2018.
  • “State Age Rating Flexibility Act of 2017” (Bucshon, R-IN) – would require a change in the permissible age variation in health insurance premium rates from 3 to 1 to 5 to 1 for adults after January 1, 2018. (This would increase the amount that older consumers may be charged for premiums from 3 times what younger patients pay to 5 times what younger patients pay).
  • “Health Coverage State Flexibility Act of 2017” (Flores, R-TX) – beginning January 1, 2018, would change the ACA’s 3-month grace periods for non-payment of premiums before discontinuing coverage under a qualified health plan to grace periods provided under State law, or 1 month if none exists.
  • “Preexisting Conditions Protection and Continuous Coverage Incentive Act of 2017” (Walden, R-OR) – would amend the Public Health Services Act to prohibit application of preexisting condition exclusions and guarantee availability of health coverage in the individual and group market, contingent on the enactment of legislation repealing the ACA.

House GOP Issues Plan to Replace ACA

On February 16, 2017, Republican leadership released a document titled “Obamacare Repeal and Replace; Policy Brief and Resources,” discussing general goals for reforming the ACA:

  • Provide age-related health care tax credits (higher credits for elderly).
  • Expand use of Health Savings Accounts (HSA) by increasing maximum HSA contribution limits and allowing both spouses to make catch-up contributions to the same HSA.
  • Repealing Medicaid expansion:
    • Reform Medicaid with a per-capita allotment for major beneficiary categories (aged, blind and disabled, children, and adults) based on each state’s average Medicaid spending in a base year, adjusted by an inflationary index; or
    • Give states the option to move to block-grants based on average spending in base year and assumption that states will move individuals currently enrolled in the Medicaid expansion out of the expansion population into other coverage; and
  • Repeal Medicaid Disproportionate Share Hospital (DSH) payments to hospitals.
  • Fund State Innovation Grants which are dubbed next generation high risk pools over which states will have spending discretion (i.e. use to help vulnerable patients, or for preventive care).

Effect on Insurance Market

The concern from the insurance industry is that total or partial repeal of the ACA without a replacement would likely destabilize the ACA insurance market place. For example, modifications such as easing the individual mandate penalties for not purchasing health insurance or allowing a parallel market of cheaper limited duration insurance plans would likely deplete healthy individuals from the insurance pool.

In fact, the first challenge facing newly-confirmed HHS Secretary Price likely will be stabilizing insurance markets. Insurance providers like Moda Health Plan Inc. have sued the government seeking over $5 billion in total unpaid subsidies to cover insurers’ losses during the initial years of implementing the ACA under the risk corridors program.

On February 9, 2017, Moda Health Plan was awarded $214 million from the federal government by the United States Court of Federal Claims. It not yet clear whether the Trump Administration will appeal this decision.

On February 14, 2017, health insurance company Humana announced that it will pull out of the ACA exchanges in 2018. This is after Humana reduced its participation from 15 states to 11 states last year. Aetna pulled out of 11 states in 2017 and remains in four. Last year, UnitedHealth announced that it would exit most of the ACA exchanges.

On February 15, 2017, under Secretary Tom Price’s leadership, CMS issued a Proposed Rule titled, “Patient Protection and Affordable Care Act; Market Stabilization.” In the rule, CMS amends standards relating to special enrollment periods by requiring that consumers provide documentation proving eligibility; limits guaranteed availability of coverage in situations where premium payments have not been paid; allows greater flexibility of the percentages of costs the ACA plans will cover; and shortens the timing of the annual open enrollment period from November 1 to December 15, instead of January 31, in the individual market for the 2018 plan year.

Although CMS did not allow insurers to increase premium rates charged to older consumers, as some expected and as proposed in the “State Age Rating Flexibility Act of 2017” draft bill, the rule is in line with the “Plan Verification and Fairness Act of 2017” and is inching toward the “Health Coverage State Flexibility Act of 2017” that deals with coverage availability.

Because this proposed rule was issued under the leadership of Tom Price as Secretary of HHS, we expect that the January 20, 2017 memo from Reince Priebus delaying regulations is not applicable. It is not clear, however, which “two prior regulations would be identified for elimination,” to satisfy the “Reducing Regulation and Controlling Regulatory Costs” executive order.

Effect on Hospitals

If the insurance market is destabilized by efforts to repeal the ACA, hospital executives are in turn worried that they will lose insured patients. Under the ACA, hospitals agreed to forgo an estimated $232 billion in government payments over the first 10 years of the law, including DSH payments covering the poor and the annual Medicare payment raises. This deal was premised on the hospitals expecting that all of those insured under the ACA would make up the difference by paying for their care.  If the ACA were to be repealed and/or the number of insureds were to be drastically decreased, the hospitals have expressed that they would request their money back.

Orphan Drug Program Investigation

On February 10, 2017, Republican Senator Chuck Grassley, chairman of the Senate Judiciary Committee, confirmed that he has opened an inquiry on possible misuses of the orphan drug program and how that may have contributed to high prices on commonly used drugs.