House Republicans passed their replacement plan for the Affordable Care Act on May 4. The Senate Republicans introduced their version of the bill June 22 and a revised version July 13. How do the American Health Care Act in the House and the Better Care Reconciliation Act in the Senate differ from the ACA? We look at the major provisions of the bills.
Is there a requirement to have insurance or pay a tax?
House bill: No. For all months after Dec. 31, 2015, the bill eliminates the tax penalties that the ACA imposes on nonexempt individuals for not having health insurance, as well as employers with 50 or more full-time workers that do not offer health insurance to their employees.
However, there is a penalty for having a gap in coverage. Insurers are required to charge 30 percent higher premiums for one year, regardless of health status, to those entering the individual market who didn’t have continuous coverage, which is defined as a lapse in coverage of 63 days or more over the previous 12 months.
Senate bill: The bill eliminates the tax penalties for not having health insurance, and the penalties on large employers for not providing insurance. But anyone with a lapse in coverage of 63 days or more must wait six months before purchasing insurance on the individual market.
Are insurance companies required to offer coverage regardless of preexisting conditions?
House bill: Yes, but there could be penalties associated with not having continuous coverage. Insurers are required to charge 30 percent higher premiums for one year, regardless of health status, to those entering the individual market who didn’t have continuous coverage. But an amendment proposed in late April allows states to obtain a waiver that would enable insurers to charge even more to people with preexisting conditions who do not maintain continuous coverage. Such policyholders could be charged higher premiums based on health status for one year. After that, provided there wasn’t another 63-day gap, the policyholder would get a new, less expensive premium that was not based on health status. This change would begin in 2019, or 2018 for those enrolling during special enrollment periods.
States with such a waiver would also have to have either a “risk mitigation program,” such as a high-risk pool, or participate in a new Federal Invisible Risk Sharing Program, as a House summary of the amendment says. Beyond those programs, another amendment to the bill would provide $8 billion in federal money over five years to financially aid those with preexisting conditions who find themselves facing higher premiums in waiver states.
For more on this waiver program, see our May 4 article, “The Preexisting Conditions Debate.”
Senate bill: Plans sold on the state- and federal marketplaces would have to offer coverage regardless of preexisting conditions. However, insurers who sell plans on those marketplaces would be able to sell non-compliant plans on the individual market outside of those marketplaces. A non-compliant plan, which couldn’t be purchased with premium tax credits, could deny coverage or charge more based on health status. Compliant plans would receive funding through a new State Stability and Innovation Program from 2020 to 2026 to help lower costs, as policyholders with high health costs would likely choose those plans.
What happens to the expansion of Medicaid?
It will be phased out under both bills.
Prior to the ACA, Medicaid was available to groups including qualified low-income families, pregnant women, children and the disabled. The ACA expanded eligibility to all individuals under age 65 who earn up to 138 percent of the federal poverty level (about $16,643 a year for an individual), but only in states that opted for the expansion. Thirty-one states and the District of Columbia have opted in to the expansion, which includes enhanced federal funding, so far. More than 11 million newly eligible adults had enrolled in Medicaid through March 2016, according to an analysis by the Kaiser Family Foundation of data from the Centers for Medicare & Medicaid Services.
House bill: No new enrollment can occur under this Medicaid expansion, with enhanced federal funds, after Dec. 31, 2019. States that haven’t already opted in to the expansion by March 1, 2017, can’t get the ACA’s enhanced federal funding for the expansion-eligible population.
To be clear, the bill doesn’t eliminate the Medicaid expansion coverage for those who are enrolled prior to 2020 in the current expansion states. But if those enrollees have a break in coverage for more than one month after Dec. 31, 2019, they won’t be able to re-enroll (unless a state wanted to cover the additional cost itself).
The Republican plan includes another notable change to Medicaid. It would cap the amount of federal funding that states can receive per Medicaid enrollee, beginning in fiscal year 2020, with varying amounts for each category of enrollee, such as children, and the blind and disabled. Currently, the federal government guarantees matching funds to states for qualifying Medicaid expenses, regardless of cost. Under the GOP bill, states have the option of receiving a block grant, rather than the per-capita amounts, for traditional adult enrollees and children – not the elderly or disabled. States also have the option of instituting work requirements for able-bodied adults, but not pregnant women or the elderly.
Senate bill: Under the ACA, the federal government currently pays 95 percent of the cost for the expansion population – an amount that will gradually decline to 90 percent by 2020 and then remain at that level. Under the Senate bill, states that already have expanded Medicaid would get reduced federal funding beginning in 2021 – 85 percent of costs – down to 75 percent in 2023. In 2024, the enhanced federal funding ends, and reverts to a regular state match rate of at least 50 percent.
The bill also keeps the House bill’s cap on federal funding and the block-grant option for certain adults, but it allows the cap to be lifted in areas where public health emergencies are declared. It provides $5 billion in funding for such emergencies from 2020 to 2024.
Are insurers required to cover certain benefits?
House bill: The latest version of the bill requires insurers to provide 10 essential health benefits mandated by the ACA, unless a state obtains a waiver to set its own benefit requirements. The ACA’s essential health benefits required insurance companies to cover 10 health services: ambulatory, emergency, hospitalization, maternity and newborn care, mental health and substance use disorder services, prescription drugs, rehabilitative services and devices, laboratory services, preventive care and chronic disease management, and pediatric services including dental and vision.
Beginning in 2020, states could set their own essential health benefits by obtaining a waiver.
At that point, state requirements could vary, as they did before the ACA was enacted. For instance, a 2009 report from the Council for Affordable Health Insurance, a group representing insurance companies, said 47 states had a mandate for emergency service benefits, while 23 mandated maternity care and only three mandated prescription drug coverage.
State Medicaid plans would not have to meet the essential health benefits requirement after Dec. 31, 2019.
Senate bill: It also keeps the ACA’s essential health benefits requirement for marketplace plans; however, the bill makes it easier for states to obtain a waiver to drop or adjust those benefits for the individual and small-group market. States also can more easily drop or adjust a limit on out-of-pocket cost-sharing. Non-compliant plans that are sold outside of the marketplaces would not have to meet the benefit requirements or limit on out-of-pocket cost-sharing.
Are there subsidies to help individuals buy insurance? How do they differ from the Affordable Care Act?
There are two forms of financial assistance under the ACA: premium tax credits (which would change under the GOP plan) and cost-sharing to lower out-of-pocket costs (which would be eliminated).
Let’s look at the premium tax credits first. They would be available to individuals who buy their own coverage on the individual, or nongroup, market.
House bill: Instead of a sliding scale based on income, as under the ACA, the House Republican plan’s tax credits are based on age, with older Americans getting more. (The plan, however, allows insurers to charge older Americans up to five times more than younger people, as we will explain later.)
The ACA tax credits also take into account the local cost of insurance, varying the amount of the credit in order to put a cap on the amount an individual or family would have to spend for their premiums. The Republican plan doesn’t do that. (See this explanation from the nonpartisan Kaiser Family Foundation for more on how the ACA tax credits are currently calculated.)
There are income limits under the GOP bill. Those earning under $75,000, or $150,000 for a married couple, in modified adjusted gross income, get the same, fixed amounts for their age groups — starting at $2,000 a year for those under age 30, increasing in $500 increments per decade in age, up to $4,000 a year for those 60 and older. The tax credits are capped at $14,000 per family, using the five oldest family members to calculate the amount. This new structure would begin in 2020, with modifications in 2018 and 2019 to give more to younger people and less to older people.
For those earning above those income thresholds, the tax credit is reduced by 10 percent of the amount earned above the threshold. For instance, an individual age 60 or older earning $100,000 a year would get a tax credit of $1,500 ($4,000 minus 10 percent of $25,000).
That hypothetical 60-year-old gets $0 in tax credits under the ACA. But if our 60-year-old earns $30,000 a year, she would likely get more under the ACA than the GOP plan: In Franklin County, Ohio, for instance, the tax credit would be $6,550 under the ACA in 2020 and $4,000 under the Republican plan. (This interactive map from the KFF shows the difference in tax credits under the health care plans.)
The health insurance marketplaces stay, but the tax credits can be used for plans sold outside of those marketplaces.
And the different levels of plans (bronze, silver, etc.) based on actuarial value (the percentage of costs covered) are eliminated. Small-business tax credits would end in 2020.
Senate bill: Tax credits would be available to those earning up to 350 percent of the federal poverty level. (The Affordable Care Act provides subsidies to those earning between 100 percent and 400 percent of the poverty level.) The tax credit under the ACA is designed to cap what an individual would have to pay toward premiums, based on the cost of a benchmark plan. The Senate GOP bill would use a less expensive plan as the benchmark and adjust what individuals would pay out-of-pocket for premiums based on age for those earning above 150 percent of the federal poverty level. Younger individuals would pay less toward premiums.
Someone earning between 300 percent and 350 percent of the federal poverty level, for example, would pay 6.4 percent of income for an insurance policy if he or she is 29 years old or younger. The required contributions then go up with age: 8.9 percent for 30- to 39-year-olds; 12.5 percent for 40- to 49-year-olds; 15.8 percent for 50- to 59-year-olds; and 16.2 percent for those over age 59. (Under the ACA, those at the poverty level contribute 2.4 percent of income in 2020, and those earning 400 percent of the poverty level contribute 10.2 percent, according to projections from the Kaiser Family Foundation.)
Like the House GOP bill, insurers can charge older Americans five times more than younger individuals.
The health insurance marketplaces and different metal levels of plans remain in the Senate version, but the bill makes it easier for states to obtain a waiver to change those requirements. States could eliminate marketplaces and allow tax credits to be used for plans sold outside of those marketplaces. The ACA also allows states to get waivers from its health insurance requirements, if the state can provide coverage that is equal to or more comprehensive than it would be under the ACA, and at least as affordable as under the ACA. The Senate bill would allow states to receive waivers without demonstrating that they could meet those requirements.
The bill allows for new small business association health plans to be sold in the large-group market. Small-business tax credits would end in 2020.
House and Senate bills: As for the cost-sharing subsidies available now under the ACA — which can lower out-of-pocket costs for copays and other expenses for those earning between 100 percent and 250 percent of the federal poverty level — those would be eliminated in 2020.
Both bills set up funds that states can use to help reduce costs for high-risk individuals, with some requirements for state matching funds. The House bill calls for $130 billion in funding over nine years, and the Senate bill calls for $182 billion.
Both bills would allow anyone to buy a catastrophic plan, not just those under 30 as is the case with the ACA.
What does the bill do regarding health savings accounts?
Senate bill: Money from an HSA could be used to pay premiums for non-compliant plans sold outside of the marketplaces and high-deductible plans.
House and Senate bills: Both bills would increase the contribution limits for tax-exempt HSAs, from $3,400 for individuals and $6,750 for families now to $6,550 and $13,100, respectively. They allow individuals to use HSA money for over-the-counter drugs, something the ACA had limited to only over-the-counter drugs for which individuals had obtained a prescription.
There were so-called winners and losers in the individual market under the ACA. How would that change under this bill?
Both the current law and the Republican proposals primarily impact the individual market, where 7 percent of the U.S. population buys its own health insurance. As we’ve written many times, how the ACA affected someone in this market depended on their individual circumstances — and the same goes for the Republicans’ plans. In general, because the ACA said that insurers could no longer vary premiums based on health status and limited the variation based on age, older and sicker individuals could have paid less than they had before, while younger and healthier individuals could have paid more.
The GOP plans allow a wider variation in pricing based on age: Insurers can charge older individuals up to five times as much as younger people, and states can change that ratio. Under the ACA, the ratio was 3:1. So, younger individuals may see lower premiums under this legislation, while older individuals could see higher premiums.
House bill: Older Americans do get higher tax credits than younger Americans under the Republican plan, but whether that amounts to more or less generous tax credits than under the ACA depends on other individual circumstances, including income and local insurance pricing. Those with low incomes could do worse under the GOP plan, while those who earned too much to qualify for tax credits under the ACA (an individual making more than $48,240) would get tax credits.
We would encourage readers to use the Kaiser Family Foundation’s interactive map to see how tax credits may change, depending on various circumstances. “Generally, people who are older, lower-income, or live in high-premium areas (like Alaska and Arizona) receive larger tax credits under the ACA than they would under the American Health Care Act replacement,” KFF says. “Conversely, some people who are younger, higher-income, or live in low-premium areas (like Massachusetts, New Hampshire, and Washington) may receive larger assistance under the replacement plan.”
Also, some individuals with preexisting conditions could see higher premiums under the legislation, if they don’t maintain continuous coverage and live in states that received waivers for pricing some plans based on health status.
Senate bill: The Kaiser Family Foundation also has an interactive map showing how tax credits could change under the Senate legislation. In Franklin County, Ohio, a 60-year-old earning $30,000 would get a slightly higher tax credit ($520) than under the ACA, but pay more on net for insurance, since the overall premium would be higher. A 27-year-old would pay less than under the ACA. Also, premiums for compliant and non-compliant plans sold outside the marketplaces would vary.
Which ACA taxes go away under the GOP plan?
House bill: Many of the ACA taxes would be eliminated.
As we said, the bill eliminates all fines on individuals for not having insurance and large employers for not offering insurance. Also, beginning in 2017, for high-income taxpayers, the bill eliminates the 3.8 percent tax on certain net investment income. The 0.9 percent additional Medicare tax on earnings above a threshold stays in place until 2023. The bill repeals the 2.3 percent tax on the sale price of certain medical devices in 2017 and the 10 percent tax on indoor tanning services (effective June 30, 2017). It also gets rid of the annual fees on entities, according to the IRS, “in the business of providing health insurance for United States health risks,” as well as fees on “each covered entity engaged in the business of manufacturing or importing branded prescription drugs.”
It reduces the tax on distributions from health savings accounts (HSAs) not used for qualified medical expenses from 20 percent to 10 percent and the tax on such distributions from Archer medical savings accounts (MSAs) from 20 percent to 15 percent. It lowers the threshold for receiving a tax deduction for medical expenses from 10 percent to 5.8 percent of adjusted gross income.
And from 2020 through 2025, the bill suspends the so-called “Cadillac tax,” a 40 percent excise tax on high-cost insurance plans offered by employers.
Senate bill: It also eliminates many of the ACA taxes, but it keeps the 0.9 percent additional Medicare tax and 3.8 percent tax on certain investment income for high-income earners. The indoor tanning tax would be repealed effective Sept. 30, 2017. The threshold for the tax deduction for medical expenses would be reduced to 7.5 percent.
Will young adults under the age of 26 still be able to remain on their parents’ plans?
House and Senate bills: Yes. The bills do not change this provision of the ACA.
How does the bill treat abortion?
House bill: It puts a one-year freeze on funding to states for payments to a “prohibited entity,” defined as one that, among other criteria, provides abortions other than those due to rape, incest or danger to the life of the mother. This would include funding to Planned Parenthood under Medicaid, which is most of the organization’s government funding. Under current law, Planned Parenthood can’t use federal money for abortions, except those in cases of rape, incest or risk to the mother’s life.
Also under the GOP plan, tax credits can’t be used to purchase insurance that covers abortion beyond those three exceptions. Health insurance companies would still be able to offer “separate coverage” for expanded coverage of abortions, which individuals could then purchase on their own.
Senate bill: It also includes the one-year freeze on Planned Parenthood funding under Medicaid, and the limitation on tax credits being used for plans that cover abortion.
How many people will have insurance under the plan, as compared with the ACA?
House bill: The nonpartisan Congressional Budget Office estimated that the legislation, as passed by the House, would lead to 14 million fewer people having insurance in 2018 and 23 million fewer insured in 2026, compared with current law under the ACA.
Senate bill: CBO estimated that the original bill would lead to 15 million fewer people having insurance in 2018 and 22 million fewer insured in 2026, compared with current law. We do not yet have a CBO analysis on the July 13 revised bill.
How much will the bill cost, as compared with the ACA?
House bill: CBO estimated that the legislation passed by the House would reduce federal deficits by $119 billion over the next decade, 2017-2026. It would reduce revenues by $992 billion, mostly by repealing the ACA’s taxes and fees, and reduce spending by $1.11 trillion for a net savings of $119 billion, according to CBO.
Senate bill: CBO estimated that the original bill would reduce federal deficits by $321 billion over the next decade. It would reduce revenues by $701 billion and reduce spending by $1.022 trillion, for a net savings of $321 billion. However, we do not yet have a CBO analysis on the July 13 revised bill, which now retains two of the ACA’s main tax provisions, among other changes.
Where can I get more information?
The full text of the House bill and amendments is here, and the Senate bill is here. A detailed summary of the House bill and a detailed summary of the Senate bill, as well as a chart comparing the two with the Affordable Care Act, are available from the Kaiser Family Foundation.
Editor’s Note: This story will be updated and revised on our website, FactCheck.org, as new information becomes available. Those who are not reading this on FactCheck.org can click here for the latest version.