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Today the House passed the American Health Care Act (“AHCA”), the Republican’s bill to “repeal and replace” the ACA, on a narrow partisan vote of 217-213. All but 20 Republicans voted for the bill, and the Democrats were unanimous in opposition.
The successful vote comes after a roller-coaster series of weeks that at times appeared to be destined for certain passage, followed by certain defeat, then an extended period of uncertainty.
All attention will now turn to the Senate to determine the fate of the ACA.
History: Freedom Caucus Frustrates
Following the election of President Trump and Republican majorities in the House and Senate last November, it appeared certain that Republicans would swiftly repeal the ACA upon taking office. The only question was which Republican’s vision would form the framework for the replacement approach. See our webinar on the replacement proposals for a more detailed summary of the various Republican “replace” visions.
On March 6, House Republicans unveiled their official legislative draft of the AHCA. The AHCA incorporates a number of provisions that have been championed for years by Speaker Ryan and current HHS Secretary Price.
The problem was it did not incorporate most of the provisions desired by the conservative/libertarian Freedom Caucus bloc of the Republican party. With only a 22-vote margin among House Republicans for the requisite majority, the Freedom Caucus’s 30+ members could prevent the bill’s passage by themselves. And when it came time to vote on the AHCA, they did just that. Speaker Ryan pulled the bill from the floor immediately before the scheduled vote on March 24 when it became clear that there were not 216 votes in the House.
The MacArthur Amendment: State Waiver Compromise
Although it initially appeared House Republicans would turn their sights almost exclusively to tax reform, negotiations quietly persisted through the congressional spring recess. Representative MacArthur (R-NJ), co-chair of the “Tuesday Group” of approximately 50 moderate House Republicans, worked in earnest to develop a compromise with the Freedom Caucus.
Representative Mark Meadows, chair of the Freedom Caucus, came to an agreement with Rep. MacArthur last week. The result is what’s now known as the “MacArthur Amendment.”
The goal of the MacArthur Amendment is to permit states to waive certain ACA requirements that are likely to cause increased premium costs. The state waiver compromise approach preserves the ACA core market reform provisions for those states that choose not to seek the waiver.
There are three types of state waivers available under the MacArthur Amendment:
1) Age Rating Ratio: The AHCA modifies the ACA’s 3-to-1 age band ratio to 5-to-1 (based on an estimated true cost of care ratio at 4.8 to 1). This waiver would permit states to increase the permitted age rating to a ratio greater than 5-to-1.
2) Essential Health Benefits: The ACA requires that individual policies and certain small group employer plans provide coverage for a package of 10 “Essential Health Benefits.” This waiver would permit states to define their own list of essential health benefits without regard to the ACA list. It is not clear how this would affect the prohibition of lifetime and annual dollar limits on essential health benefits, or the out-of-pocket maximum limitations, for employer-sponsored group health plans.
3) Health Status Underwriting: The ACA prohibits insurers from using health status as a factor when underwriting policies in the individual market. This waiver would permit states to allow insurers to include health status as a legal factor when engaging in underwriting for individuals who did not maintain continuous coverage, subject to a number of limitations and safeguards.
State waiver request will be granted by default unless the Secretary of HHS (Secretary Price) notifies the state within 60 days after the date of the submission of the application that the request failed to meet any applicable requirements. Waivers are effective for a period of 10 years.
The original MacArthur Amendment was itself amended via a separate stand-alone bill to clarify that members of Congress may also be subject to such a waiver.
The Upton Amendment: Additional Protections for Preexisting Conditions
One of the core concerns with repeal of the ACA has always been avoiding a return to the preexisting condition exclusion (PCE) issue that plagued the individual market prior to the ACA. The ACA addressed the issue with a blanket prohibition on PCEs, paired with the individual mandate in an attempt to drive participation among those with no current medical expenses.
The AHCA generally takes a different approach by instead imposing a premium surcharge of 30% for 12 months for an individual enrolling after a break in coverage of 63 or more days in the prior year. States that elect a MacArthur Amendment break from that scheme, however, by permitting additional premium costs and health status underwriting.
The fear from many moderates was that the waiver states would not have sufficient protections in place to ensure access to coverage for individuals who a) had a break in coverage, and b) returned to the individual market with a preexisting condition. Although the AHCA still prohibits insurers from imposing PCEs, the cost of coverage in those circumstances could exceed any reasonable standard of affordability.
Representative Fred Upton (R-MI), an influential member of the moderate Tuesday Group, led the charge in pushing back. He even went so far as to say that the MacArthur Amendment “torpedoes” safeguards for individuals with preexisting conditions.
To address these concerns, Rep. Upton (R-MI) negotiated yet another compromise to bridge the last small gap in reaching the magic 216 votes needed for passage. The result is what’s now known as the “Upton Amendment.”
In short, the Upton Amendment provides an additional $8 billion in high-risk pool funding over five years (2018-2023) for waiver states for individuals with preexisting conditions who fail to maintain continuous coverage (and therefore may be subject to health status underwriting). The $8 billion supplements the AHCA’s existing $130 billion in high funding over ten years.
The Upton Amendment’s funding enhancement targeting those who may be subject to health status underwriting in the individual market proved to be the final missing link, enabling Speaker Ryan to schedule the long-awaited AHCA vote for today.
Summary of the American Health Care Act Provisions
Click here for the official section-by-section summary from the House Energy and Commerce and Ways and Means Committees, updated to include the MacArthur and Upton Amendments.
Here Comes the Senate Battle
The Senate can pass this bill by a simple majority (50 votes with Vice President Pence as the tiebreaker) without the threat of filibuster through the reconciliation process. Any changes by the Senate will need to be approved by the House before presenting the bill for President Trump’s signature.
In light of the extreme difficulty in negotiating the MacArthur and Upton Amendments in the House, it could prove a near-impossibility to acquire the sufficient majority in the House a second time to approve any Senate changes. The Senate therefore faces the stark choice of passing the House bill in its current form, or risking the bill’s failure by tweaking any of its tightly-wound provisions.
Where Can I Learn More?
Register now for our next Office Hours Webinar on Thursday, May 25:
The American Health Care Act: Details on the ACA Repeal and Replace Bill
Disclaimer: The intent of this analysis is to provide the recipient with general information regarding the status of, and/or potential concerns related to, the recipient’s current employee benefits issues. This analysis does not necessarily fully address the recipient’s specific issue, and it should not be construed as, nor is it intended to provide, legal advice. Furthermore, this message does not establish an attorney-client relationship. Questions regarding specific issues should be addressed to the person(s) who provide legal advice to the recipient regarding employee benefits issues (e.g., the recipient’s general counsel or an attorney hired by the recipient who specializes in employee benefits law).