Update: Visit here for a full analysis of the Senate health care bill, including an update on a postponement of consideration of the bill until after the July 4th recess.
The U.S. Senate began earnest debate on the draft bill known as the Better Care Reconciliation Act of 2017 (BCRA), an issue with enormous implications for every American who now needs or may need health care coverage in the future. On June 26, 2017, legislators received the score from the Congressional Budget Office (CBO) on the BCRA and the impact of repealing and replacing various provisions in the Affordable Care Act (ACA).
The CBO analysis closely mirrors its assessment of the health care bill passed in the House of Representatives on May 24. That bill, the American Health Care Act (AHCA), went to the Senate, where leadership crafted a different version — the BCRA. The CBO analysis helps frame the implications of the legislation, illustrating its economic impact on various markets and giving employers a preview of what the BCRA would mean to them and their employees if the bill is signed into law.
The upshot: The CBO analysis of the draft Senate bill resembles its analysis of the House bill last month. The implications will vary widely depending on states’ choices regarding waivers and the subsets of the population examined. The Senate now must move forward using this information to determine the legislation’s path. We may see many amendments to the bill before a final vote. It appears that the Senate may revise the bill significantly, which will require the CBO to issue an updated analysis.
The CBO’s Findings
The Senate bill to replace much of the ACA took a publicity hit when the CBO analysis said it would cause approximately 22 million more uninsured Americans by 2026 — only 1 million fewer than the CBO predicted with the House-passed legislation. Both the Senate and House versions of health care reform could mean as many as 49 million people could lack health insurance by 2026, vs. 28 million under the ACA. As with the House bill, the Senate bill increases the uninsured disproportionately, affecting more low-income and older Americans. Additionally, the CBO report forecast that 4 million people who obtain their coverage through their employer could lose coverage by 2018. This could be the result of the repeals of both the individual mandate and the penalties for employers with 50 or more full-time equivalent employees who don’t offer adequate, affordable coverage to their full-time employees. It should be noted that by 2026, employer coverage would rebound to the levels of what is expected under current law.
The Senate bill would cut the U.S. deficit by nearly three times as much as the House bill between the 10-year span of 2017-2026. Savings in the House-passed AHCA totaled $119 billion, compared with $321 billion under the Senate bill, according to the CBO. This was key to the bill’s status under reconciliation rules, which require the Senate’s legislation to achieve at least as much in savings as the House bill. This leaves bill proponents with a $202 billion buffer for negotiations with reluctant senators as the issue gets debated.
As with the House bill, the Senate bill repeals the bulk of the ACA’s taxes. The only exception in both bills to a direct revenue source is the controversial “Cadillac tax” on high-end insurance policies, which the BCRA reinstates in 2026. As with the AHCA, the BCRA would seek to balance the budget by cutting federal outlays in health care, including cuts to Medicaid and tax credits.
The ACA, still in force, requires insurers to provide 10 essential health benefits, including prescription drugs, maternity care, and mental health care. Additionally, various other market reforms affecting health underwriting rules were contained in the ACA. The Senate bill, similar to the House bill, allows the states to waive some of these market requirements. Although the House and Senate bill took different directions in their approach and what the waivers could contain, the move away from ACA requirements generally would have the same impact on the markets.
Individual (non-group) health insurance market
A small fraction of the U.S. population resides in areas where insurers would not offer non-group coverage; or if the insurers were to offer it, they would likely charge exorbitant premiums to offset reduced subsidies. As with the House bill, the BCRA has the potential to create market instability in certain regions.
Similar to the House bill, the Senate legislation would initially increase health insurance premiums; on average, they would decrease over the long term. But again, wide variations will occur because of geography. Out-of-pocket costs for health care would increase. Price hikes could be substantial for states that waive or modify the market reform rules, such as the essential health benefits, which weaken the scope of health coverage in particular areas. Co-pays and deductibles would likely rise, and in some areas the out-of-pocket costs would increase for non-covered services.
BCRA’s Passage Uncertain
Senators use CBO scores to start the debate on budget reconciliation bills. A chamber rule disallows provisions ancillary to direct spending, revenue, or debt limit. Because the BCRA now contains many rule-based provisions — such as market reforms — without direct ties to the federal budget, opponents may challenge significant portions of the bill. The complex rules of budget reconciliation in the Senate make it difficult to predict the potential outcome.
To pass items in the bill that may be considered under reconciliation rules, supporters need 50 votes with the Vice President as the tie breaker. Republicans can’t lose the votes of more than two senators if Democrats stay unified against the legislation. By attempting to adjust the bill to appease moderates, Senate leaders risk losing the votes of conservative members, and vice versa. Bill supporters must wrestle with budget reconciliation limitations, Republican Party factions, policy implications, and settlement with the House’s legislation.
Employers Still Must Comply with ACA
Until Congress passes a new health care bill that is signed into law, the ACA is still intact — including its employer shared responsibility provisions — and businesses must continue to comply with its provisions.
Paychex is monitoring the health care coverage issue closely and will provide updates.