Latest Senate ACA Overhaul Bill Tries to Appease Both Moderates and Conservatives
- On July 13, Senate Republicans revealed their latest version of a bill to partially repeal and replace the Affordable Care Act (ACA).
- No timetable set for a vote, as passage not yet guaranteed.
- No increase to premium tax credits, no robust changes to Medicaid.
- Some ACA taxes maintained, funding for market stability.
- Unexpected changes made to HSAs, small-business health plans, qualified small-employer, health reimbursement arrangement, ACA Section 1332 state innovation waivers.
Latest version aims to placate both moderates and conservatives
On July 13, 2017, U.S. Senate Republicans revealed their latest version of a bill to partially repeal and replace the Affordable Care Act (ACA). The U.S. House of Representatives passed its version of a health care overhaul bill May 4, but the Senate has struggled to craft legislation that will garner enough votes for passage.
Senate leaders have not set a definitive timeline for a vote. Earlier media reports indicated that Republicans, headed by Senate Majority Leader Mitch McConnell (R-Ky.), hoped to have a vote on the bill next week. However, McConnell announced on Tuesday that he would delay the Senate’s August recess until the third week so that members could continue working on their agenda. The Senate was scheduled to go on recess from July 31 until after Labor Day.
The Republican leadership has been walking a tightrope, striving to adjust the legislation to appeal to moderates and conservatives at the same time, in order to secure the votes needed for passage. Generally, tweaks that appeal to conservatives make the moderates less comfortable with the bill, and vice versa. The final version appears to contain more provisions for the conservative members than adjustments for the moderates.
Anticipated changes that didn’t materialize
Two looked-for adjustments to the bill’s first iteration didn’t appear in this second version.
Premium tax credits – Observers expected that Senate leaders would increase the amount of premium tax credits, which the original bill draft significantly reduced from the ACA’s current levels — particularly for older individuals. This change was expected to increase support among moderates.
Medicaid – Robust changes to Medicaid from the original Senate version were expected to garner support from moderate senators. The original bill draft markedly reduced federal outlays to Medicaid, increasing the states’ burden to support program enrollees.
Expectations that were met
ACA taxes – The revised Senate bill retains the 0.9 percent Medicare tax for employment income above the threshold. Additionally, it keeps the net investment income tax (3.8 percent Medicare Tax) to appeal to moderates, in order to retain additional funds that could go toward funding health care.
Funding for market stability – Cruz Amendment – This amendment appropriates a one-time $70 billion for years 2020 through 2026 (until it runs out) to make payments to health insurers offering plans that don’t meet ACA market reforms, as long as they also offer at least one gold-level and one silver-level qualified health plan. The funds are granted to support high-risk individuals in the plans that meet market reforms. The bill specifies that consumers can use health savings accounts to pay premiums for plans that don’t meet ACA market reforms. However, these plans would not be eligible for premium tax credits and do not meet continuous coverage requirements. This amendment aims to garner the support of conservative hold-outs.
Health saving accounts (HSAs) – Effective 2018, the bill would allow plan participants to use an HSA to cover premiums for high-deductible coverage in excess of premium tax credits, the allowable tax deduction, or the amount excludable under gross income tax. Also, it would extend dependents who are allowed the use of accounts, including children under the age of 27.
Small-business health plans – The new version clarifies that certified professional employer organizations would be eligible to offer small-business health plans to their customers, as trade associations would be able to offer their member businesses. The revised Senate bill makes changes that address the structure and operation of these arrangements.
Qualified small-employer health reimbursement arrangement – The new version rectifies a drafting error in the original proposed bill: It would preclude enrollees from receiving a premium tax credit any time they receive a qualified small-employer health reimbursement arrangement benefit, whether or not it is affordable
ACA Section 1332 state innovation waivers – This provision adds a requirement that states applying for waivers must increase enrollment in private plans. This would appear to negate waivers for single-payer and public-option proposals that do not use private insurance. Consequently, states would not have access to the federal funds available with these waivers. Conservatives would tend to support this change to drive funding to the private sector.
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Additional reviews expected next week
A new Congressional Budget Office score is expected early next week. The Senate Parliamentarian must also review the latest bill draft and opine on whether it contains items that do not meet budget reconciliation requirements.
If the Senate passes the bill, Congress would have to reconcile the Senate and House versions of the legislation. As of now, the House’s scheduled recess has not changed. This will limit the time that legislators have to compromise on the bill before the House goes into recess.
Businesses, employees unaffected at this time
While Congress wrestles with a new health care plan for the nation, the Affordable Care Act continues as the law of the land. When and if the Senate passes a bill, it must be reconciled with the version that passed the U.S. House of Representatives in May. Until both the Senate and the House pass the same bill and the president signs it, the ACA stays in effect — including its employer shared-responsibility provisions.
Because the legislative process is fluid, it’s important to stay compliant with the current law. Paychex is monitoring this critical issue and will keep you informed as Congress works on it.