Update: On the afternoon of Sept. 26, Republican leadership announced that it would not hold a vote on this legislation. At this time, it does not appear that the Republicans have a path forward on the current effort to repeal and replace the Affordable Care Act before the September 30 deadline. We will monitor for any further updates as they occur.
- Senate Republicans attempting final push to repeal and replace the Affordable Care Act (ACA) before Sept. 30.
- Graham-Cassidy bill would push responsibility for healthcare marketplaces onto the states.
- States would have to absorb the cost of building and retaining health insurance systems.
- Graham-Cassidy changes the structure of qualified health plans after 2018, and then repeals the premium tax credit and cost-sharing reduction subsidies by 2020.
- States would get limited block grants to determine their own healthcare systems.
- States can apply for waivers to opt out of certain ACA requirements.
Republicans in the U.S. Senate are attempting a final push to repeal and replace the Affordable Care Act (ACA) ahead of the Sept. 30 deadline. They only have until the end of the month to use budget reconciliation as a vehicle to pass a bill along party lines with a simple majority vote. After the new fiscal year starts, changes to the law would go through the normal course of legislation and require 60 votes (instead of 50 with Vice President Pence as the tiebreaker) to overcome a filibuster by the Senate Democrats.
The legislation, commonly referred to as the Graham-Cassidy bill, is sponsored by Senators Bill Cassidy, R-LA.; Lindsey Graham, R-SC; Dean Heller, R-Nev.; and Ron Johnson, R-Wis. It quietly gained momentum among Republicans, who earlier this month were primarily focused on a bipartisan effort to promote stability in the health insurance market. However, bipartisan efforts appear to have come to an abrupt halt as Graham-Cassidy gained strength among the Republican majority in the Senate. The momentum stalled last week as Sen. John McCain, R-Ariz., publicly announced his opposition. And early this week, Sen. Susan Collins, R-Maine, announced her opposition to the latest bill as well. Nevertheless, Republicans were working a full-court press, adjusting the bill to entice holdouts and potentially alter the position of senators currently opposed, such as Rand Paul, R-KY.
At this juncture, it is uncertain whether Senate Majority Leader Mitch McConnell, R-KY., will bring the bill to a vote on the Senate floor. It is also unclear whether Senate Republicans will have the votes necessary to pass the bill.
The Congressional Budget Office (CBO) released their preliminary analysis on Monday. The analysis was limited due to time constraints. Consequently, the CBO focused on the direct budget impact to ensure it met the required thresholds to proceed under budget reconciliation. The analysis confirmed that savings would at least meet the saving threshold contained in the version that passed the House in May. The analysis also attempted to qualify, in general, what may happen in the insurance markets. Although they did not specify a particular number for the uninsured rates and premium amounts, the analysis opined millions would lose coverage and significant variations between states would exist. In general, this analysis was in lockstep of other iterations of CBO scores of repeal and replace legislation, absent the specific figures.
Key Provisions in the Bill
This iteration of an ACA replacement defers responsibility to the states. Each state would have to build its own infrastructure to support healthcare marketplaces. State legislatures would need to implement policies to shore up their markets, which may mean that employers doing business in more than one state would have to support different rules. Accordingly, states would again become the main drivers determining how employers and healthcare markets intertwine. The Graham-Cassidy bill also would require states to absorb the cost of building and retaining health insurance systems while balancing the needs of their populations — likely with limited resources.
The Graham-Cassidy legislation retains some of ACA’s taxes, including the additional Medicare tax, from both W-2 income and self-employment income of 0.9 percent of income above the threshold. Additionally, it retains net investment income tax (3.8 percent of Medicare). The excise tax on high-cost coverage (the “Cadillac tax”) remained in the most recent version of the bill. Regarding tax deductions, Graham-Cassidy repeals only the medical device tax and the deduction for expenses under Medicare Part D.
Employer Shared-Responsibility and Individual Shared-Responsibility Provisions
As with previous versions of legislation to replace the ACA, the Graham-Cassidy bill maintains the employer shared-responsibility and individual shared-responsibility provisions. However, penalties would be reduced to zero retroactive to 2016. Graham-Cassidy makes no mention of employer or individual reporting requirements associated with the shared-responsibility provisions.
Until the premium tax credit sunsets, employers might still be required to report information until 2020. The Internal Revenue Service (IRS) currently uses the data to assess the eligibility of premium tax credits and employer shared responsibilities. Consequently, the reporting may become more truncated to support only the premium tax credit information. For current-year filing, employers must follow the information reporting forms unless the IRS mandates change.
Premium Tax Credit and Cost-Sharing Reduction Subsidies
Similar to previous bill iterations, Graham-Cassidy changes the structure of qualified health plans after 2018, and then repeals the premium tax credit and cost-sharing reduction subsidies as of 2020. However, the legislation provides no federal substitutes for the tax credits, as were contained in prior versions of the bill. Instead, it gives states limited block grants to determine their own systems. Each state would have to build its own framework to support its health markets.
Making robust changes to Medicaid, the Graham-Cassidy bill significantly reduces the program’s federal outlays, and puts additional burdens on the states to decide how to support their Medicaid populations.
Graham-Cassidy punts responsibility for stabilizing healthcare markets to the states. States will have to determine how to ensure that an adequate number of young, healthy consumers participate in their marketplaces to keep the programs funded. Doubtless, a patchwork of regulations would ensue across the nation, requiring the support of employers.
Health Savings Accounts (HSAs)
Graham-Cassidy echoes previous versions of ACA repeal-and-replace bills, making it easier to use various healthcare savings vehicles. This push is consistent with general Republican messaging to expand the use of HSAs.
Small-Business Tax Credit
The ACA’s small-business tax credit, designed to help small businesses and small tax-exempt organizations afford the cost of providing health insurance for their employees, sunsets in 2020. In the interim, Graham-Cassidy makes minor tweaks to what can be considered qualified health plans.
States can apply for waivers to opt out of certain ACA requirements, including various underwriting rules in the individual and small-group markets, varying rates based on health status, essential health benefits, and medical loss ratio.
Graham-Cassidy allow states to permit insurers to raise premiums for individuals with pre-existing conditions. It would increase the age ratio, so older individuals may pay more for premiums. The bill would give states federal dollars to help offset those rate increases, though it would also cut the federal contribution to Medicaid in many states. Health care reform experts, such as the Kaiser Family Foundation, expect that anyone with an insurance carrier-defined “pre-existing condition” would be at risk of paying higher, and possibly unaffordable, premiums for coverage under Graham-Cassidy.
No Impact to Businesses or Employees at this Time
Until the President signs a bill that both the Senate and the House pass, the ACA continues in effect. If Graham-Cassidy passes in the Senate, the House will have to pass the bill as-is (no amendments). There would be no time for the House to send an amended bill to return to the Senate by the Sept. 30 deadline.
The Senate Parliamentarian must also review the bill and determine whether specific items fail to meet budget reconciliation requirements. Reconciliation bills are limited to items that directly affect the federal budget’s spending, revenue, or debt limit. Provisions that don’t meet budget reconciliation rules could change Graham-Cassidy supporters’ tactics to recruit the final handful of votes needed for the bill’s passage.
Graham-Cassidy Bill Approaching Deadline, but ACA in Force until Further Notice
Employers must remember that the Senate furor over Graham-Cassidy does not change anything at this point. The ACA and all its provisions continue as the law of the land. Even if the bill passes as-is, employers will still be required to comply with employer shared responsibility reporting requirements. No version of ACA repeal-and-replace legislation has done away with information reporting. The IRS has not indicated it will provide businesses any relief or extensions for the 2017 filing, which means that businesses must apply increased diligence. These filing requirements require complex calculations and compiling months of data throughout an employer’s organization.
Additionally, lawmakers have not proposed changes to notice requirements and W-2 reporting of healthcare costs in any version of the legislation. Employers should not grow apathetic about their compliance responsibilities for the ACA.
The legislative process is fluid. It’s important to stay compliant with the current healthcare law. No one knows whether Graham-Cassidy will make it through Congress, and if it does, what the final form will contain. Paychex will monitor the bill as it makes its way through the Senate and report on any occurrences of significance.