1. American Health Care Act
The
American Health Care Act
A Guide for NAIFA Members
March 2017

3. President Trump: “It’s Wonderful!”

4. How Does it Affect Advisors?

5. Meet the Players
House Republican leadership introduced two budget reconciliation bills that make significant changes to the ACA.
Collectively the bills are titled the American Health Care Act.
House Committees of Jurisdiction:
Ways and Means
Energy and Commerce
What’s Reconciliation?
Reconciliation is a special legislative process created as part of the Budget Act of It is intended to help lawmakers make the tax and mandatory spending changes necessary to meet the levels proposed in the congressional budget resolution.
Reconciliation instructions are put forward as part of a concurrent budget resolution that passes both chambers of Congress. These instructions set cost or savings targets for the congressional committees, with instructions covering mandatory spending, revenue, or debt limit changes. Following these instructions, committees of jurisdiction identify specific policies to meet these goals in the form of a reconciliation bill, which can be enacted on a fast-track basis.
The bills, collectively titled the American Health Care Act, are the responses to the instructions they received in the Budget Resolution passed by Congress in mid-January to prepare budget reconciliation legislation to repeal the ACA.

6. Summary of Changes x P ∆ ACA Provisions Action
American Health Care Act
Individual mandate x
Replaces the individual mandate with a continuous coverage incentive
Employer mandate
Employers of a certain size will no longer be required to offer insurance
Subsidies/
Tax Credits
Lower-income individuals will no longer receive subsidies to help with out-of-pocket costs for co-pays or deductibles ∆
Rather than subsidies, individuals will receive tax credits to help pay for premiums
Medicaid expansion
Phases out expansion by 2020, capping payments in some states
Health savings accounts
Raises the contribution limits for HSAs
Age-ratio
Modifies age rating limit to permit variation of 5:1, unless states adopt different ratios
Dependent coverage until 26 P
Dependents can stay on their parent’s insurance plans until the age of 26
Pre-existing conditions provision
Insurers must cover those with pre-existing conditions at the same price as the healthy
Essential health benefits
All plans must cover 10 essential benefits, including maternity care & preventative care
Prohibitions on annual/lifetime limits
Insurers are not allowed to set a limit on coverage for an individual

7. Ways and Means Dismantles most ACA taxes and mandates Expands HSAs
Modifies ACA premium tax credits for
Implements new tax credits in 2020
Dismantles ACA taxes and mandates including the individual and employer mandate penalties and taxes on prescription drugs, over-the-counter medications, health insurance premiums, and medical devices. More to come on this in a moment.
Expands HSAs by increasing HSA contribution limits to an amount equal to the sum of the annual deductible and out-of-pocket expense limits permitted by a high deductible health plan (HDHP). Allows both spouses to make catch-up contributions to the same HSA . It would also allow HSAs to cover qualified medical expenses incurred up to 60 days before HSA coverage begins. All provisions effective for 2018.
Modifies ACA premium tax credits for  to increase amount the amount for younger adults and reduce it for older adults. The changes would also tallow credits to apply to coverage sold outside of exchanges and to catastrophic policies.
Implements new tax credits in 2020 – In 2020 the ACA income-based tax credits will be replaced with flat tax credits adjusted for age. The tax credit is refundable and advanceable on a monthly basis to pay for individual market premiums. Eligibility for new tax credits phases out at income levels between $75,000 and $115,000. Also allowed for coverage both inside or outside of exchanges.

8. Key Taxes Repealed The health insurance tax
The prohibition against paying for OTC medications with HSAs, Archer MSAs, or flexible spending or health reimbursement arrangements
The medical device excise tax
Cadillac tax delayed 5 years (until 2025)
The health insurance tax—a special annual tax on health insurers, as of 2018.
The “tax on over-the-counter (OTC) medications”—this refers to the repeal of the ACA’s exclusion of OTC medicines from the definition of qualified medical expenses that could be paid with health savings account (HSA) funds. This is effective as of 2018.
The medical device tax
Delays Cadillac tax – The one ACA tax that stays on the books is the Cadillac tax, however it delays the tax for a further 5 years.
It appears this was included to satisfy Senate prohibitions on reconciliation provisions that increase out-year deficits.

9. Key Taxes Repealed
Reduces the penalty (from 20% to 10% for HSAs, 20% to 15% for MSAs) for the use of funds for non-medical purposes
The $2,500 limit on contributions to FSAs
Reduces the level of medical expenses that must be incurred to claim a tax deduction from 10% to 7.5%
The penalty tax for use of HSA or Archer Medical Savings Account (MSA) funds for nonqualified medical expenses goes back to 10 percent from the ACA’s 20 percent level, as of 2018.
The ACA’s imposition of a $2,500 limit on contributions to a flexible spending arrangement (FSA), which this official explanatory Ways & Means-prepared document refers to as a tax, would be repealed, as of 2018.
Restores the threshold for deductibility of unreimbursed medical expenses from the ACA’s 10 percent to the pre-ACA level of 7.5 percent of adjusted gross income (AGI), as of (It also extends the special rule for taxpayers over age 65 for 2017.)

10. Key Taxes Repealed
The 3.8% tax imposed on high-income taxpayers on their investment income, starting in 2018
The 0.9 percent Medicare tax imposed on high-income taxpayers, beginning in 2018
And…
The 3.8 percent tax imposed on high-income taxpayers on their investment income, starting in 2018
The 0.9 percent Medicare tax imposed on high-income taxpayers, beginning in 2018

11. Key Taxes Repealed …the tanning tax. tanning tax.
The plan also restores the pre-ACA rules regarding the deduction for expenses allocable to Medicare Part D (prescription drug coverage) subsidies, and repeals the It also repeals the limit on the deductibility of compensation paid to health insurance company executives.

12. Energy and Commerce Enacts a continuous coverage requirement
Creates a Patient and State Stability Fund 
Unwinds Medicaid expansion 
Implements a per capita Medicaid allotment
Enacts a continuous coverage requirement and imposes late enrollment penalties that requires health insurers to add a 30% surcharge to premiums for people who have a gap in coverage for more than 63 days. The surcharge renews annually and will not be assessed the following year if continuous coverage is maintained.
Creates a Patient and State Stability Fund with federal funding of $100 billion over 9 years. States may use funds to provide financial help to high-risk individuals, promote access to preventive services, provide cost sharing subsidies, and for other purposes. In states that don’t successfully apply for grants, funds will be used for reinsurance programs.
Unwinds Medicaid expansion – In a shift from previous drafts of the legislation, which ended Medicaid expansion immediately the AHCA continues coverage expansion through January 1, 2020.  In 2020 Federal Medical Assistance Percentages (out of pocket subsidies) are eliminated except for those enrolled as of December 31, 2019 who do not have a break in eligibility of more than 1 month.
Implements a Per capita Medicaid allotment – Converts Medicaid to a “per capita cap” system in 2020 (using 2016 as a base year), where states would get a lump sum from the federal government for each enrollee.

13. Energy and Commerce
Ends the ACA’s actuarial value (AV) and metal level requirements after December 31, 2019
Allows states to permit age bands of 5:1 for plan years beginning on or after January 1, 2018
Ends the ACA’s actuarial value and metal level requirements after 12/31/ The repeal of the AV levels would allow plans to be sold with AVs of less than 60 percent, although the maximum out-of-pocket limit in the ACA is retained so insurers would not be able to sell plans less generous than the current catastrophic plans. They would also be able to sell plans with AVs of more than 90 percent, and anything in between.
Allows states to permit age bands of 5 to 1 for plan years beginning on or after January 1, – The plan changes the ACA’s rules regarding use of age as a factor in insurance premium pricing—instead of the ACA’s three age bands, five would be allowed.  Allows States to set their own age bands for premiums.

14. What’s Not Included? A tax cap on employer-provided health insurance
In its current form the legislation does not include a tax cap on employer-provided health insurance. Earlier versions of the plan had included a proposal to tax employees on the amount their employers paid for their health insurance to the extent that the premiums exceed 90% of the national average.

15. Top Ten Tax Expenditures JCT Tax Expenditure Estimates1.
Employer health and LTC premiums
$863 billion 2.
Capital gains/long term dividends
$677 billion 3.
Foreign corporations income
$587 billion 4.
Defined contribution plans
$583 billion 5.
Earned income credit
$373 billion 6.
State and local tax deduction
$368 billion 7.
Mortgage interest deduction
$357 billion 8.
Health exchange subsidies
$326 billion 9.
Defined benefit plans
$424 billion
10.
Child and dependent care credit
$270 billion
JCT Tax Expenditure Estimates FY
Expect the tax cap on employer provided health insurance to be back in mix once the tax reform debate begins as it is the largest tax expenditure on the list.

16. What’s Not Included?
The legislation does not repeal the ACAs prohibition on:
Health status underwriting
Lifetime and annual limits
Discrimination on the basis of race, nationality, disability, age, or sex
Does not eliminate the essential health benefits provisions (except with respect to Medicaid plans)
Unlike the leaked version, the final bills do not eliminate the essential health benefits provisions (except with respect to Medicaid plans). 

17. What’s Not Included?
The legislation does not repeal ACA insurance requirements such as:
Coverage for preexisting conditions
Guarantee availability and renewability of coverage
Covering adult children up to age 26
Capping out-of-pocket expenditures
The Medical Loss Ratio (MLR) requirement
The Medical Loss Ratio (MLR) requirement that insurance companies spend at least 80 percent or 85 percent of their premium revenue on medical expenses.  Agent compensation is not excluded from the MLR calculation

18. Costs

19. Highlights from CBO’s Scoring
$337 billion
reduction in the deficit over the next 10 years
$880 billion
drop in federal Medicaid spending over a decade
24 million
more people uninsured over the next 10 years
14 million
fewer Medicaid enrollees by 2026
CBO’s analysis of the ACHA estimates it would reduce the federal deficit by $337 billion over 10 years. It's a mix of reduced spending of $1.2 trillion and reduced revenues of $900 billion. Most of the savings come from the Medicaid expansion freeze, a change in federal funding of Medicaid, and elimination of the ACA premium subsides.
The report projects that in 2018 there would be 14 million fewer insured people in 2021 citing the elimination of a penalty for not buying insurance. In 2021, there would be 21 million fewer people insured, and then 24 million fewer insureds in Most of these later-year increases come from changes in Medicaid. Bottom line, CBO/JCT estimate that 52 million people would be uninsured in 2026, compared to 28 million uninsured should the ACA remain (unchanged) the law.
The CBO/JCT report predicts the ACHA will increase premiums by 15 to 20% in 2018 and 2019 in the individual market, but would lower average premiums by about 10%. The spike in premiums would come early due to elimination of penalties for not carrying insurance causing more healthy people to choose to not buy insurance. However state grants, risk pools, and no requirements for a set level of benefits would lower the average after that initial two-year period of adjustment.
However, it is important to note that the CBO and JCT analyses are based only on the legislation they're evaluating, in this case only the ACHA. The analysis does not consider other aspects of the GOP’s health reform package.
15% – 20%
increase in 2018 premiums, but an overall decrease by 2026
15%
of Planned Parenthood clinic patients would lose access to care
Sources: CBO, American Health Care Act Cost Estimate, March 13, 2017; Julie Rovner, “Deciphering CBO’s Estimates On The GOP Health Bill,” Kaiser Health News , March 13, 2017; National Journal, Alexander Perry, March 14, 2017

20. Annual Net Change to the Deficit
Billions of dollars, FY
Source: Congressional Budget Office, “Cost Estimate: American Health Care Act,” March 13, 2017;
Christine Yan, National Journal, March 15, 2017.

21. Three “R” Process
Phase 1 – Reconciliation - the AHCA Reconciliation Bill is Phase 1 of the GOPs repeal-and-replace plan.
Phase 2 – Regulatory. The ACA provided the HHS Secretary a great deal of authority and the new Sec. is expected to provide regulatory relief.
Phase 3 – Regular Order. This is legislation that is passed using regular legislative order and will need 60 votes in the Senate.

22. Next Steps
Reconciliation - Both bills cleared their policy committees on 3/9/17, proceed to Budget Committee
Regulatory Relief – Market Stabilization, future rulemaking could include excluding agent commissions from the MLR
Regular Order – Issues that can’t be addressed under Reconciliation
The House Energy & Commerce and Ways and Means Committees finished their markups on 3/9/17 where Members were able to consider the policies, offer amendments, and vote on a final product.  The bills will be combined by the House Budget Committee and sent it to the House Rules Committee, and then to the full House for a vote. 
HHS has already issued a proposed rule focusing on Market Stabilization that makes changes to annual Open Enrollment and Special Enrollment Periods. NAIFA has requested that future HHS rulemaking include excluding agent commissions from the medical loss ratio (MLR).
It’s widely expected that GOP legislation will include provisions to grant states authority to sell health insurance across state lines, tort (medical malpractice) reform, association health plans, and possibly elimination of the limited McCarran-Ferguson antitrust exemption for health insurance.

23. What Should Advisors Do?
Many of the American Health Care Act provisions align with NAIFA’s recommended health principles – NAIFA will continue to work with Congress and the Administration to help lower costs and ensure coverage is available to all citizens.
Make sure that NAIFA’s political programs remain strong by donating to IFAPAC, being active in APIC and making sure you are your colleagues are registered for the 2017 Congressional Conference

24. Contribute to IFAPAC!

25. Be Politically Active
Share your expertise with Congress in the district and in D.C.
Make sure the crucial provisions affecting advisors are protected

26. More Information available at: www.naifa.org/caphill
Register Today!
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