Following a series of thwarted efforts and delays, on May 4, 2017, the U.S. House of Representatives passed by a narrow margin of 217-213 the American Health Care Act of 2017 (H.R. 1628) (AHCA), a plan to repeal and replace the Affordable Care Act.

The Congressional Budget Office and Joint Committee on Taxation first estimated that the initial version of the bill would reduce the federal budget deficit by $337 billion from 2017-2026, and further projected that the bill would leave 24 million Americans uninsured by 2026.  There is significant uncertainty in the Senate regarding the form of its health care legislation and the timing of possible consideration of the bill by the full Senate.

Key provisions from the House bill include:

  • Medicaid Expansion Roll-Back. Beginning January 1, 2020, Medicaid expansion would become a State option, comprised of both “expansion enrollees” and “grandfathered enrollees.” For States that adopted expansion as of March 31, 2017, the bill would eliminate the option to extend coverage to adults above 133% of the Federal Poverty Level. The bill would further impose per-capita caps beginning FY 2020, but would provide States the option to elect a Medicaid block grant for certain patient populations (e.g., children and non-expansion adults) for a period of 10 years. The bill would also eliminate Medicaid DSH cuts for FY 2020 through FY 2025, and further exempt non-expansion States from Medicaid DSH cuts for FYs 2018 and 2019. Eligibility redeterminations would be required every 6 months for expansion enrollees beginning October 1, 2017, with the corresponding threat of civil monetary penalties up to $20,000 for claiming eligibility for otherwise ineligible individuals.
  • Safety Net Funding for Non-Expansion States. The bill would provide a total of $10 billion over 5 years (FY 2018 through FY 2022) to non-expansion states, provided as safety net funding. These safety net allotments would be determined based on the number of individuals in the State with incomes below 138% of FPL in 2015 relative to the total number of individuals with incomes below 138% FPL for all non-expansion states in 2015.
  • Patient and State Stability Fund. The bill would establish a new Patient and State Stability Fund, which funds can be used by States to assist high-risk individuals who do not have access to health insurance coverage, stabilize health insurance coverage, promote access to preventive and other health care services, stabilize premiums for individuals with pre-existing conditions, and reduce the cost of and promote participation in the small and group health insurance markets, among other uses. To be eligible to receive such funds, a State would be required to submit a written application to the CMS Administrator describing how the funds will be allotted and how such funds will achieve at least one of the aforementioned goals. Applications would be approved not later than 60 days after submission unless denied by the CMS Administrator for any stated non-compliance.
  • Health Savings Accounts. The bill aims to stimulate use of Health Savings Accounts (“HSAs”) by making tax free contribution limits equal to the limit on out-of-pocket cost sharing under certain qualified high deductible health plans (i.e., $6,550 for individuals, $13,100 for families in 2017). In addition, individuals over 55 years old would be permitted to make a supplemental “catch-up” contribution of $1,000 each year. The definition of “qualified medical expense” is further expanded under the bill to include over-the-counter medications and expenses incurred no earlier than 60 days prior to the HSA being established, which is relevant because the bill deems as non-taxable amounts withdrawn for qualified medical expenses.
  • Individual Mandate. The bill would eliminate the tax penalty for not having minimum essential health coverage effective January 1, 2016. The legislation would impose a late enrollment penalty (30% of the applicable premium) on individuals purchasing non-group coverage and who have failed to maintain continuous creditable coverage for 63 consecutive days or longer beginning with the 12-month period prior to the date of enrollment in the new health plan.
  • Limited Medicare Program Changes. The High Income Earners payroll tax would be eliminated beginning January 1, 2023 and the annual fee imposed on brand prescription drug manufacturers would be eliminated beginning January 1, 2017. However, other elements of the Medicare program would remain unchanged as a result of AHCA, including the ACA’s planned reductions in Medicare and Medicare Advantage payments and testing of various health care quality, delivery and payment demonstration programs.
  • Essential Health Benefits and Other Coverage. The ACA requirement that health plans cover at least 10 essential health benefits would not be changed, nor would the requirement that dependent coverage be provided for individuals up to age 26. Beginning in 2020, however, the bill would enable states to apply for waivers to re-define the scope of essential health benefits for plans offered in the individual and small group markets. The bill would also prohibit abortion coverage from being a required benefit, and Federal premium tax credits could not be applied to plans that cover abortion services beyond the Hyde Amendment’s limited exceptions (i.e., to save the life of the woman, or if the pregnancy arose from rape or incest). The bill would further eliminate Medicaid funding for Planned Parenthood for one year, effective upon date of final enactment.
  • Employer Provisions.  For large employers, the tax penalty for not providing health benefits would be reduced to zero and would be retroactively effective January 1, 2016.