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Revised Senate Health Reform Continues to Threaten Coverage for Millions

On July 13, 2017 Senate Republican leaders released a revised discussion draft of the Better Care Reconciliation Act (BCRA). The changes made in this version of the Senate proposal do not substantively change the basic features of the original BCRA proposal. The Congressional Budget Office (CBO) concluded the original BCRA ultimately strips coverage from more than 22 million Americans. An updated CBO score is expected early next week.

The discussion draft leaves in place the dramatic restructuring of the federal Medicaid program. The reduced federal commitment to Medicaid accounted for a significant portion of the CBO’s estimate of newly uninsured under BCRA.

In addition, the new discussion draft also includes language that could destabilize the individual insurance market. The new Title III in the draft allows insurers that offer specific products inside of the exchange marketplaces to offer products outside of the exchange that are not subject to Affordable Care Act (ACA) standards and consumer protections. This provision will allow for low-benefit plans that appeal to and can selectively enroll younger and healthier individuals, while leaving older individuals and those with pre-existing health conditions who need comprehensive coverage siloed in products that will become increasingly costly as the risk pool deteriorates. This proposal threatens to return the market to the pre-ACA discriminatory practices that left out those with less than perfect health status.

Here are preliminary highlights of the changes in the new discussion draft.

Preliminary Overview of the July 13 Revisions to the BCRA

Medicaid

  • Medicaid Per Capita Cap. Maintains the proposed per capita cap restructuring of federal Medicaid funding, shifting to a formula-based, fixed funding allocation for states. The revised BCRA discussion draft specifies that if a public health emergency is declared, Medicaid expenditures will not count toward the per capita cap or block grant allocations for the declared period of the emergency.
  • Medicaid Block Grants. Allows the Medicaid adult expansion population to be included under a block grant if states choose a block grant for adult enrollees over the per capita cap. In the prior version, block grants could only cover other Medicaid nonelderly, nondisabled, adult populations.
  • Medicaid Waivers. Establishes an $8 billion, four-year demonstration of state incentive payments for home and community-based services for the aged, blind, and disabled. States compete to secure funding and the 15 lowest population density states receive priority consideration. The revised BCRA maintains the elimination of the ACA enhanced Medicaid match for Home and Community-Based Attendant Services and Supports (a $19 billion cut over ten years), which California currently uses to partially finance the In-Home Supportive Services Program.
  • Retroactive Eligibility. Reinstates 90-day retroactive eligibility for seniors and persons with disabilities only. The BCRA otherwise limits eligibility to the month in which the applicant applied.
  • Enhanced Medicaid Funding for Native Americans. Extends eligibility for enhanced federal Medicaid matching funds for any provider that serves Medicaid-eligible Native Americans.
  • DSH Funding Calculation. Changes the DSH calculation for states that, unlike California, did not expand Medicaid coverage to childless adults.

Insurance Market

  • Non-ACA Compliant Offerings. After 2019, allows an insurer that offers specified products in the exchange to also offer products outside of the exchange that do not meet ACA standards. Specifically, insurers must offer in the exchange:
  1. At least one gold level and one silver level ACA compliant plan (as the ACA is amended by the BCRA), and
  2. One premium tax credit benchmark plan. Under the BCRA the benchmark plan for premium tax credits is a plan with actuarial value of 58 percent. Generally, the actuarial value represents the percent of health services covered by the policy and the consumer pays the remaining costs (e.g., 42 percent).

For the years an insurer meets these two requirements, BCRA allows the insurer to offer products outside the exchange that do not meet ACA market rules (non-compliant plans).

Non-compliant plans could avoid complying with any of the following ACA requirements:

✔️ essential health benefit requirements (with some exceptions)
✔️ rating restrictions including limitations on age rating
✔️ guaranteed issue requirements
✔️ open and special enrollment period
✔️ prohibition on pre-existing condition exclusions or other discrimination based on health status, medical condition, disability
✔️ prohibition on excessive waiting periods to secure coverage
✔️ requirements on coverage of preventive health services
✔️ requirements to ensure that consumers receive value for their premium payments (medical loss ratio standards)

The revised draft also states that insurers must comply with state requirements applicable to health insurance offered in the state.

The non-compliant plans are not eligible for premium tax credits and State 1332 Waivers cannot be used to redirect premium tax credits to non-compliant plans. Non-compliant plans are also ineligible for the ACA risk adjustment program. Health Savings Accounts (HSA) can be used to support premium payments if the non-compliant plan is otherwise HSA-eligible.

Non-compliant plans are not considered “credible coverage.” The BCRA imposes a six-month waiting period for individuals seeking coverage who failed to maintain continuous credible coverage, meaning they experienced a gap in coverage of more than 63 days in the preceding 12 months.

The draft appropriates an additional $2 billion in funding for states to offset the additional costs states may incur in regulating non-compliant plans.

  • Tax Credits. For the first time, allows premium tax credits to be used to purchase catastrophic plans, provided the individual meets other eligibility requirements for the tax credits. Catastrophic plans are high deductible health plans that cover at least three primary care visits per year before the deductible is met. Catastrophic plans are subject to the federal limit on out-of-pocket costs.
  • Catastrophic Plans. In 2019, allows any individual participating in the individual market to enroll in a catastrophic plan. Currently, enrollment in catastrophic plans is limited to individuals under 30 years of age and those with a hardship exemption from the requirement to maintain minimum essential coverage. (Hardships exemptions apply when financial situations and other circumstances keep an individual from securing comprehensive insurance coverage.)
  • Late Enrollment Penalty. Revises the BCRA “look back” period when an individual applies for special enrollment. Eligibility for special enrollment is triggered by certain life events, such as marriage, divorce, or loss of job-based coverage. To avoid the penalty of a six-month waiting period, an individual applying for special enrollment must have at least one day of credible coverage during a 60-day “look back” period immediately preceding the date of application. Applicants using open enrollment must demonstrate 12 months of credible coverage without a significant break immediately preceding the submission of their application.
  • Health Savings Accounts. Allows Health Savings Accounts to be used for health insurance premiums.
  • Adjusting the Benchmark. Authorizes the Secretary of the Treasury to increase the value of the BCRA benchmark plan (58 percent actuarial value) in any rating area where no plan at 58 percent actuarial value is offered.
  • Market Stabilization State Grants. Adds $70 billion to the BCRA’s $112 billion State Stability and Innovation Fund, which provides grants to states to address the health care needs of high-risk individuals, help stabilize premiums and reduce out-of-pocket costs in the individual market. Reserves one percent of funds annually for insurers in states where the cost of insurance premiums is at least 75 percent higher than the national average.

Other Provisions

  • Opioid Crisis. Provides $45 billion over the next decade to help states combat abuse of drugs, including opioids. The BCRA originally allocated $2 billion for state grants to support substance use disorder treatment and recovery support services for 2018.
  • ACA Taxes. Reinstates the 3.8 percent levy on investment income for high income earners, individuals with investment incomes over $200,000 and couples with investment incomes over $250,000. Reinstates the ACA 0.9 percent Hospital Insurance payroll tax on these high income earners.

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