How Does the Senate Healthcare Bill Differ From the House Bill?

BCRA Retains Some Parts of the AHCA, but Differs in Some Key Ways

United States Capitol Building: Calm Before The Storm
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On June 22, 2017, the U.S. Senate unveiled the healthcare reform bill that they had drafted entirely behind closed doors in the weeks since the House passed the American Health Care Act (AHCA) on May 4. Although it has the same bill number (H.R.1628), the Senate titled their version the Better Care Reconciliation Act (BCRA) of 2017. The bill keeps a lot of the AHCA, but also has some fundamental differences.

In the following weeks, the Senate introduced a few new variations of the BCRA, but they continued to draft the legislation on a partisan basis, with no committee hearings or bipartisan debate. The first update, released on June 26, incorporated a continuous coverage requirement, which hadn't been included in their earlier version (you can see both versions of the Senate bill here). Additional versions of the BCRA were introduced on July 13 ( section-by-section summary), and on July 20 (section-by-section summary).

The Senate has also introduced the Obamacare Repeal Reconciliation Act (ORRA), which simply repackages legislation that both chambers passed in 2015 (HR3762) to repeal several major provisions of the ACA. That legislation is often referred to as "repeal and delay" since it does not contain any framework for replacing the ACA. President Obama vetoed it in early 2016, but some lawmakers in the Senate are interested in passed it again now that President Trump is in office (this legislation has very little chance of passing, given the reluctance that moderate Republicans in the Senate have shown when it comes to repealing the ACA without a solid replacement on deck).

For now, we'll consider the BCRA, and how compares with the AHCA. We have several articles about the AHCA, to help you understand more about the House plan for health care reform:

So let’s take a look at the ways that the BCRA differs from the AHCA.

Tax Cuts

The Affordable Care Act (ACA), the repeal of which is ostensibly the goal of both the House and Senate proposals, included a variety of new taxes on high-income Americans and health care corporations, as well as the tax penalties associated with the individual mandate and employer mandate.

The revenue from these taxes is used to shore up the health care system and provide better, more affordable coverage to more people. The individual mandate is also a tool to incentivize healthy people to maintain coverage, and the employer mandate incentivizes large employers to offer high-quality, affordable coverage to their full-time workers.

The AHCA repeals the taxes, and the early versions of the BCRA also repealed them. Later versions of the BCRA, however, keep two key taxes in place: The 0.9 percent Medicare payroll tax surcharge o n high-income earners, and the 3.8 percent capital gains (ie, unearned income) tax on high-income tax filers (repealing these taxes would mostly benefit people who earn at least a million dollars a year). 

The AHCA and the BCRA both result in reduced federal revenue, although the two bills have different schedules in terms of when the various taxes would be repealed.

And the reduction in federal revenue is less severe in the later versions of the BCRA, since it retains the Medicare taxes on high-income earners (over the coming decade, retaining those two taxes prevents a loss of $231 billion in federal revenue, according to the Congressional Budget Office's analysis of the BCRA).

To offset the tax cuts (many of which would still apply under the BCRA), federal funding for Medicaid and premium subsidies is also reduced.

Medicaid

Most Medicaid funding is used to provide long-term care for elderly Americans, and to provide medical care for low-income children, pregnant women, and people with disabilities (about two-thirds of nursing home residents are covered by Medicaid, and nearly half of all births in the U.S. are covered by Medicaid).

Under the ACA, Medicaid has also been expanded to cover eligible low-income adults. Both the AHCA and the BCRA roll back the expansion of Medicaid, and dramatically cut overall federal Medicaid funding. Rolling back Medicaid expansion would certainly fall under the category of repealing the ACA (the stated purpose of the current Republican health care reform push), but the overall federal funding cuts for Medicaid go way beyond ACA repeal.

According to the Congressional Budget Office (CBO) analysis, federal Medicaid spending would be reduced by $834 billion over the next decade under the AHCA. The July 20 CBO analysis of the BCRA projects $756 billion in Medicaid funding cuts through 2026, but it's notable that the BCRA cuts Medicaid more sharply starting in 2025, so the cuts under the BCRA will be larger than the cuts under the AHCA if we extend the analysis out another decade (the CBO has projected that by 2036, federal Medicaid spending will be 35 percent lower under the BCRA than it would be if the ACA is maintained).

Under the ACA, the federal government currently pays 95 percent of the cost of covering the population that became eligible for Medicaid under the ACA’s expansion of the program. That’s set to decrease to 90 percent as of 2020, and remain at that level going forward.

The AHCA would not allow for any new states to expand Medicaid after March 1, 2017, and would switch to each state’s regular Medicaid matching percentage (between 50 percent and 75 percent; poorer states get a larger match) as of 2021. That would essentially end new Medicaid expansion enrollments, as states would have to foot an unaffordable percentage of the bill.

The AHCA also converts Medicaid (the whole program, not just the ACA’s Medicaid expansion) to a per-capita allotment system, with the per-capita funding from the federal government adjusted annually by CPI-Medical+1 (the medical component of the consumer price index, plus one percentage point). It's important to note that the Medicaid population tends to be sicker than the overall population, so the CPI-medical number doesn't accurately reflect medical cost growth in the Medicaid population.

The BCRA would also restrict Medicaid expansion to states that had expanded as of March 2017. But instead of cutting the federal funding for Medicaid expansion all in one go, the federal matching rate would drop to 85 percent in 2021, 80 percent in 2022, and 75 percent in 2023. Starting in 2024, it would revert to the state’s regular Medicaid matching percentage. That means that states wouldn’t abruptly lose all of the enhanced federal funding that currently applies to the Medicaid expansion population, but there are several states where state law would terminate Medicaid expansion if the federal match falls below 90 percent (Arkansas, Arizona, Illinois, Indiana, Michigan, New Hampshire, New Mexico, and Washington).

The BCRA would also switch Medicaid to a per-capita allotment system, but instead of adjusting the amounts by CPI-Medical+1, the BCRA would only adjust by CPI-Medical through 2024, and by the regular CPI (not the medical component) starting in 2025. CPI-Medical is generally a larger number than overall CPI, since medical costs tend to inflate faster than other costs. Overall CPI can actually be negative, which could result in a year-over-year federal Medicaid funding cut. So states would see steeper cuts in their federal Medicaid funding as times goes by under the BCRA.

The Requirement to Maintain Health Insurance Coverage

The ACA requires most people to maintain health insurance coverage or face a tax penalty. There is a substantial list of exemptions from the penalty, but the IRS reported in early 2017 that 6.5 million tax filers had been assessed approximately $3 billion in penalties for being uninsured in 2015.

The AHCA and the BCRA both eliminate the penalty, retroactive to the start of 2016. The AHCA replaces it with a one-year, 30 percent increase in premiums for people who have a gap in coverage of 63 or more days in the previous 12 months (or, as described below, states can opt to allow insurers to base premiums on medical history when applicants have a gap in coverage).

Interestingly, the version of the BCRA that was released on June 22 didn't replace the penalty elimination with anything. It would have simply repealed it, and did not include any provision to incentivize people to maintain continuous coverage.

But almost immediately, there were rumors that some sort of continuous coverage requirement would be added at a later date, and a new version of the legislation was published on June 26, which includes a continuous coverage requirement (you can see side-by-side copies of the June 26 and June 22 versions of the BCRA here; the new section about continuous coverage starts on page 135 of the June 26 version). The continuous coverage requirement has been maintained in later versions of the BCRA.

Under the revised BCRA, people would have to maintain continuous coverage or face a potential waiting period before they could obtain coverage in the individual health insurance market. Here's how it would work:

  • People with continuous coverage (ie, during the previous 12 months, they did not have a gap in coverage of 63 or more days) would be able to enroll during open enrollment or a special enrollment period, with regular effective dates (the first of the following month or the second following month, depending on the enrollment date).
  • People without continuous coverage who enroll during open enrollment or a special enrollment period would be subject to a six-month waiting period before their coverage would take effect.
  • People without continuous coverage who enroll outside of open enrollment and without a special enrollment period would have to wait for the later of a six-month waiting period or the start of the next plan year before their coverage could take effect (so enrolling in February without a special enrollment period would mean that your coverage would take effect the following January).
  • People who have individual market coverage in force on the day before their new individual market plan is to take effect would not be subject to the six-month waiting period, even if they had a gap in coverage during the prior year (for example, a person who enrolls during open enrollment, subject to a six-month waiting period, and then experiences a qualifying event soon after the new plan takes effect, would be able to switch to a new plan during the ensuing special enrollment period with no waiting period, even if her previous gap in coverage was still within the last 12 months).
  • New babies and newly adopted children would not be subject to the waiting period as long as they are enrolled within 30 days of birth or adoption (note that the ACA gives new parents 60 days to enroll a newborn or newly adopted child).

Essential Health Benefits

The ACA requires coverage of essential health benefits on all non-grandfathered, non-grandmothered, individual and small group plans. Essential health benefits are also required to be covered on all Medicaid expansion plans.

The AHCA does not change essential health benefits at the federal level, but would allow states to seek waivers under which they could redefine essential health benefits within the state.

The BCRA also does not change essential health benefits at the federal level, and does not include the type of state waiver process outlined in the AHCA. But it does allow states much broader access to the ACA’s 1332 waivers. These “innovation waivers” allow states to come up with unique approaches to health care reform (Hawaii is thus far the only state that has an approved 1332 waiver under the ACA).

The ACA has a solid set of consumer protection rules to ensure that the coverage people have under a 1332 waiver is just as good, covers no fewer people, and is no more expensive than it would be without the waiver. The ACA also requires 1332 waivers to be budget-neutral for the federal government, and this requirement is retained by the BCRA. But the consumer protections are eliminated, replaced with a requirement that the state simply describe how they would go about “increasing access to comprehensive coverage, reducing average premiums, and increasing enrollment.” So a state would be able to change essential health benefit rules using a 1332 waiver under the BCRA, since there would no longer be a requirement that coverage remains as comprehensive under the waiver as it was previously.

The July 13 version of the BCRA included the Cruz Amendment (authored by Senator Ted Cruz, of Texas). The Cruz Amendment has not yet been scored by the CBO, and it's unclear whether Senate leaders plan to include it in the version of the bill that is brought for a vote (if that in fact happens).

The Cruz Amendment would have a significant impact on coverage of essential health benefits. It would allow insurers to sell non-compliant plans as long as they also sell at least one silver plan, one gold plan, and one 58 percent actuarial value plan (this would be the benchmark plan under the BCRA). Depending on state laws, the Cruz Amendment would allow insurers to avoid a variety of the current regulations pertaining to health coverage, including essential health benefits.

Coverage for Pre-Existing Conditions

The ACA requires all individual and small group plans to be guaranteed-issue, regardless of medical history.

The AHCA would allow states to seek waivers under which insurers could, for one plan year, base premiums on medical history if the applicant had a gap in coverage of 63 or more days during the previous 12 months. Insurers would not be able to reject application altogether based on medical history (as they could in most states prior to 2014), but they would be able to charge higher premiums—with no cap—which would essentially make coverage unaffordable for people with pre-existing conditions and a gap in coverage.

The BCRA maintains the ACA’s guaranteed-issue requirements and community rating, which means that people could not be charged more based on their medical history. But because of the readily-available 1332 waivers, states would be able to redefine essential health benefits, resulting in coverage that might not protect people with pre-existing conditions. For example, if health plans no longer have to cover a wide range of prescription drugs and your pre-existing condition requires expensive drugs, the fact that pre-existing conditions are “covered” won’t be much help.

In addition, the BCRA imposes a six-month waiting period for anyone who enrolls in coverage after experiencing a gap in coverage of more than 63 days within the prior year. So a person who goes without coverage would be unable to obtain coverage for at least six months, even if he or she were to enroll during open enrollment. It would thus be particularly important for anyone with a pre-existing condition to maintain continuous coverage at all times.

Premiums Based on an Enrollee’s Age

The ACA allows insurers to charge older enrollees up to three times as much as 21-year-old enrollees. But the premium subsidies in the ACA are based on the idea that net (after-subsidy) premiums should be equal for people with equal income (up 400 percent of the poverty level, above which the ACA subsidies are not available). So while premiums are higher for older enrollees, premium subsidies are larger for older enrollees in order to offset the higher premiums.

The AHCA would allow insurers to charge older enrollees five times as much as they charge 21-year-old enrollees (or an even larger multiple if states choose to allow it). The legislation would provide age-based premium subsidies that would be larger for older enrollees, but not by enough to offset the difference in premiums. Older people would end up paying far more in premiums than younger people, even after subsidies are applied.

The BCRA would allow insurers to charge older enrollees five times as much as they charge younger enrollees. Premium subsidies would be larger for older people, but not by enough to offset the higher premiums, and the legislation specifically includes a provision that requires older people to pay a larger percentage of their income in after-subsidy premiums.

Premium Subsidies

The ACA provides premium subsidies that are based on keeping the premium for the benchmark plan (second-lowest-cost silver plan) in each area at an affordable level. That means the subsidies are larger in areas where coverage is more expensive, and larger for older people. Premium subsidies under the ACA are not available to people with income below the poverty level—since they’re supposed to have Medicaid instead—and they’re not available to anyone with a household income above 400 percent of the poverty level (for a household of four, that's $97,200 in 2017).

The AHCA has flat premium subsidies that only vary based on age, and do not account for the fact that premiums are far higher in some areas of the country than in others. And as noted above, the age-based adjustments to the premium subsidies would not remotely offset the higher premiums that older people would be charged. But AHCA subsidies would be available to people with higher incomes (available in full to those with income up to $75,000 for a single person and $150,000 for a married couple, and phased out above that level), thus extending the subsidy help much higher into the middle class than the ACA’s subsidies.

The BCRA maintains a subsidy structure that’s more like the ACA’s, but with some important changes. Starting in 2020, the subsidies would be available to people with income from 0-350 percent of the poverty level, as opposed to 100-400 percent of the poverty level under the ACA. That would, in theory, eliminate the current Medicaid coverage gap, since subsidies would be available to people with income below the poverty level in states that haven’t expanded Medicaid.

But the coverage available to low-income people would be far less robust than the coverage provided by Medicaid or the current ACA plans. This would be especially true after cost-sharing reduction subsidies are eliminated in 2020 as a provision of the BCRA. And for people on the upper end of the current ACA subsidy system, subsidies would be eliminated for people with income between 350-400 percent of the poverty level. If this rule were in effect in 2017, it would mean that a family of four would only be eligible for premium subsidies with an income of $85,050 instead of $97,200 (federal poverty level numbers are adjusted each year, so those caps will be different if and when the BCRA rules take effect).

And the BCRA would also tie subsidies to a new benchmark plan, which would cover an average of 58 percent of health care costs for a standard population. For reference, the ACA’s premium subsidies are tied to a benchmark plan that covers an average of 68-72 percent of costs for a standard population. This means deductibles and total out-of-pocket costs would be significantly higher under the BCRA.

For immigrants, the BCRA would also limit subsidy eligibility to “qualified aliens,” which means that people on temporary work and student visas would no longer be eligible for subsidies, as they are under the ACA.

Cost-Sharing Subsidies

The ACA provides cost-sharing subsidies to reduce the out-of-pocket costs that lower income enrollees face. People with income up to 250 percent of the poverty level are eligible for coverage that automatically includes cost-sharing subsidies, as long as they pick a silver plan.

The AHCA would eliminate cost-sharing subsidies after 2019. But notably, it also did not appropriate funding for them in the interim. Cost-sharing subsidies are the subject of an ongoing lawsuit brought by House Republicans in 2014, due to the fact that the subsidies were never appropriated by Congress. There has been considerable uncertainty about the cost-sharing subsidies in 2017, and it’s causing insurers to propose higher premiums for 2018 than they would if there was a solid commitment from the federal government to fund cost-sharing subsidies.

The BCRA would also eliminate cost-sharing subsidies after 2019. But it also specifically appropriates funding to pay them between now and then. This will help to reduce the uncertainty that insurers are facing in the individual market, although the elimination of cost-sharing subsidies after 2019 will result in low-income people being less able to afford health care.

How Many People Would Lose Coverage?

Under the AHCA, the CBO estimated that the number of uninsured people would grow by 23 million by 2026. This would include 14 million fewer people with Medicaid, 6 million fewer people with individual market (non-group) coverage, and 3 million fewer people with employer-sponsored insurance.

Under the BCRA, the CBO estimated that the number of uninsured people would grow by 22 million by 2026. This would include 15 million fewer people with Medicaid, and 7 million fewer people with individual market coverage.

Where Do We Go From Here?

The differences described above are not an exhaustive list, but address many of the things that consumers would notice if the legislation were to be implemented.

For the BCRA to pass, at least 50 of the 52 Republican Senators have to vote for it (Vice President Pence can cast a tie-breaking vote). There are a handful of GOP Senators who have expressed significant concerns about the bill, which is part of the reason it's gone through various iterations, and why the ORRA was introduced (Senators also have reservations about that bill).

If the legislation does pass the Senate, it will have to be approved by the House before it can go to the President since it’s different from the AHCA in a variety of ways. House Speaker Paul Ryan has said he’s “eager” for the Senate to pass their bill, and the assumption is that the House is fairly likely to agree to the changes the Senate has made. Senators have expressed their desire to vote on the bill before their August recess, but it's unclear if they'll have the votes to do so by then.

Sources:

Congressional Budget Office, H.R.1628, American Health Care Act of 2017, Cost Analysis. May 24, 2017.

Congressional Budget Office, H.R.1628, Better Care Reconciliation Act of 2017, Cost Analysis. June 26, 2017.

Congressional Budget Office, H.R.1628, the Better Care Reconciliation Act of 2017: An Amendment in the Nature of a Substitute [ERN17500], as Posted on the Website of the Senate Committee on the Budget on July 20, 2017. July 20, 2017.

Kaiser Family Foundation. Federal Medical Assistance Percentage (FMAP) for Medicaid and Multiplier.

Senate Budget Committee, Text of H.R.1628, the Better Care Reconciliation Act of 2017. June 22, 2017.

United States Department of Labor, Bureau of Labor Statistics. Measuring Price Change for Medical Care in the CPI.

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