House of Representatives Passes AHCA, Sends to Senate for Consideration

NAHU Washington Update – 05/05/2017

House Republicans scored a major legislative victory yesterday when they narrowly passed H.R. 1628, the American Health Care Act (AHCA) reconciliation bill to repeal and replace portions of the ACA, by a vote of 217-213 with 20 Republicans voting against. The bill could only afford to lose 22 Republican votes, with estimates prior to the vote showing 16-20 Republicans opposed and another two-dozen undecided, largely from the centrist Tuesday Group and far-right Freedom Caucus. The bill includes several new amendments since the House initially attempted a vote on the bill back in March, including allowing states to opt out of the ACA’s essential health benefits, permitting insurers under certain circumstances to charge consumers more who have pre-existing conditions, creating a reinsurance program and providing for additional funding for high-risk pools. The bill now heads to the Senate for consideration, where it must win the support of 51 votes for passage, and where Republicans control the chamber 52-48.

The White House urged Congress to vote on the bill this week after the House opted against considering the bill last week at President Trump’s urging to pass before his 100th day in office. Unlike in March where the president largely left negotiations to House Speaker Paul Ryan (R-WI), both Trump and Vice President Mike Pence were heavily involved in urging Republicans to back the proposal this week. President Trump made several pledges to win over support of moderates, declaring “It will be every bit as good on pre-existing conditions as Obamacare.” This was in response to many Republicans on both ends of the party’s spectrum peeling off in their support as various concessions were made to win support from each side.

The vote yesterday followed another turbulent week of marathon negotiations to appease enough members of the House Republican caucus to support the measure. The bill had already undergone numerous proposed revisions leading up to its cancelled vote in March, including proposals to retain the ACA’s tax on high-income Americans through a six-year extension of the 0.9% Medicare tax for individuals who earn more than $200,000 for individuals and $250,000 for married couples filing jointly. This was done as an effort to win support from the centrist Republican Tuesday Group, and retaining the tax helped to offset $15 billion of the $85 billion needed to provide additional subsidies for older Americans between the ages of 50-64 to purchase private-market coverage.

These efforts to appease centrists detracted the far-right Freedom Caucus and its roughly three dozen members.  A proposed amendment released just before the planned March vote was designed to win over the support of holdout members of the Freedom Caucus who wanted to see the ACA’s essential health benefits (EHBs) eliminated under the AHCA. However, the amendment only partially addressed the concerns of the Freedom Caucus, as to make it budget-relevant the federal government would still mandate the EHBs for plans that would be purchased with federal tax credits.

The AHCA was amended to create a $15 billion “Federal Invisible Risk Sharing Program,” which would act as a federal reinsurance program by helping insurers cover the costs of their sickest enrollees. It was offered by Representatives Gary Palmer (R-AL) and David Schweikert (R-AZ) from the House Freedom Caucus as an effort to help win over their support on the bill. That amendment augments the existing $100 billion “Patient and State Stability Fund,” which is designed to expand coverage, increase insurance options, promote access to benefits, and reduce out-of-pocket spending through $10 billion in annual funding over 10 years.

Last week, Representatives Tom MacArthur (R-NJ) and Mark Meadows (R-NC), who lead the centrist Tuesday Group and far-right Freedom Caucus, respectively, introduced a compromise amendment to allow states to receive a waiver from the Department of Health and Human Services to opt out of the ACA’s essential health benefits and age and community rating provisions. The amendment would allow states to receive a waiver to these provisions by proposing at least one of the following: reduce average premiums for coverage, increase enrollment, stabilize the market, stabilize premiums for individuals with pre-existing conditions, and increase the choice of health plans. It would not permit consumers, including those with pre-existing conditions, who maintain continuous coverage to be charged more. The waiver would be contingent on the state setting up a high-risk pool for consumers with pre-existing conditions. It is important to note that the amendment would not allow states to automatically rate up consumers with pre-existing conditions. Under the amendment, states would have to apply for a waiver, be approved, and only then could underwrite consumers with pre-existing conditions if they had not had continuous coverage and if the state had put a high risk pool in place.

However, that amendment fell short for centrist Republicans who regularly said that protecting pre-existing conditions was critically important to their support of the bill. Leading this charge were Representatives Fred Upton (R-MI), a former chair of the powerful House Energy and Commerce Committee who represents a centrist district, and Billy Long (R-MO), who represents a very conservative district that overwhelmingly voted for President Trump, and who generally supported the AHCA but privately expressed many misgivings about the legislation. Long’s defection gave cover to more mainstream Republicans who otherwise would toe the party-line and support the bill to oppose it on pre-existing condition grounds. Long noted, “I have always stated that one of the few good things about Obamacare is that people with pre-existing conditions would be covered,” and that the MacArthur/Meadows amendment would significantly weaken these protections.

Upton’s defection gave cover for other centrist Republicans to also publically state their opposition to the bill while increasing his bargaining power to win over his support and other centrists.

Upton said that the AHCA “allows the governors to waive pre-existing illnesses as part of essential benefits. I am not at all comfortable with removing that protection.” There are upwards of 40 House Republicans who represent centrist districts similar to Upton’s or are in Democratic-leaning districts, many of whom see themselves as vulnerable in supporting a measure that would eliminate insurance coverage or harm constituents with pre-existing conditions. By Tuesday, more than 20 other centrist Republicans publically stated they would also oppose the AHCA as drafted, in addition to another two-dozen who were undecided, including several in Republican leadership. This included House Republican whips Erik Paulsen (R-MN), David Valadao (R-CA) and Kevin Yoder (R-KS).

Following a meeting at the White House with President Trump, Upton and Long on Wednesday, Upton introduced an amendment to add $8 billion in federal funding over five years to cover people with pre-existing conditions. The funding would reduce premiums and out-of-pocket expenses for consumers in states that are approved for a waiver under the MacArthur/Meadows amendment. Upton said that this measure would help move him to support the bill, although he continued to express concerns about the overall package, its protections for people with pre-existing conditions, and whether the funding would be adequate for these consumers. Several industry groups this week noted that the funds would fall far short, including one that estimated they would be short by as much as $200 billion over 10 years and could force states to come up with the difference.

The House also voted on H.R. 2192, a separate measure by Representative Martha McSally (R-AZ) that would override language in the MacArthur/Meadows amendment that would have exempted members of Congress and their staff from the state waivers. The legislation is separate from the AHCA to comply with the reconciliation rules, which only allow provisions that are budget-relevant to be part of the package. After the MacArthur/Meadows amendment was introduced, Democrats seized on the exemption for Congress and launched ads in 30 Republican-held districts attacking them for the self-serving carve-out.

The efforts to win over hesitant Republicans are a stark contrast to the more than 60 votes that House Republicans cast during the Obama Administration to dismantle the ACA. Most of the concerns have stemmed from policymakers who are concerned about taking away protections for pre-existing conditions and how the AHCA, through its various amendments, would address this. Many Republicans who have long campaigned on repealing the law have also been increasingly hesitant to follow-through as the law’s popularity has grown in support and constituents worry about the future of their healthcare. This is an issue that is magnified in more centrist districts where vulnerable Republicans seek to appease these voters to avoid being voted out in the 2018 midterms, while also balancing out the concerns of Republican voters who would seek to vote them out for failing to follow-through on their promise. This leaves them with few choices: continue negotiating for a more centrist bill that would fulfill both of these constituencies, abandon reform efforts and let the law collapse and potentially leave some constituents without coverage, or work on some form of bipartisan ACA-repair compromise bill.

After the failure to hold a vote on the AHCA in March, many saw this week as their best chance of voting on a bill that could satisfy as many House Republicans as necessary for passage. The timeline for passage is complicated by the use of the budget reconciliation process, as for the first time in the 43-year history of the Congressional Budget Act, Congress could pass two budget resolutions in the same year because they didn’t pass a budget for fiscal year (FY) 2017 in 2016. Congressional Republicans initially planned on using the FY 2017 budget reconciliation vehicle on healthcare and then pass a separate tax reform package in a FY 2018 reconciliation package. But the rules only permit one budget process at a time and moving onto the FY 2018 package would cancel out their authority to pass the FY 2017 package, effectively killing their chances of enacting healthcare reform this year. So if Congress wants to enact tax reform it has two options: pass healthcare now and move on to taxes, or abandon the health bill to get to taxes.

Many Republicans, particularly those who are more conservative, have warmed up to acquiescing to the AHCA even if it doesn’t fully meet their demands as the push for bipartisan reform grows. The omnibus spending package, signed into law this week, was largely a win for Congressional Democrats after the White House backed away from many of its demands in an effort to get the deal completed. And the longer that the healthcare reform process takes, many conservatives believe it would be more likely for the White House to seek out Democratic support to move any health reform items. Representative Dave Brat (R-VA), a Freedom Caucus member, said this week, “If we don’t get a ‘yes’ vote this week, then what happens realistically? We’re taking flack back in the districts for not voting for a repeal. What is the response? The response is: ‘Well, if we block this again, then you’ll get a scenario like the budget vote: where we go out and get Democratic votes to pass the health care bill, and that is a worse outcome!’…If you don’t get this policy passed, you end up with a Democratic bill.”

The bill still needs an updated “score” from the Congressional Budget Office (CBO), an estimate of how much it will cost the federal government in reduced tax revenues or additional federal spending, prior to the AHCA being enrolled and advanced to the Senate for consideration. At this time, it is unclear which baselines that the CBO will be using, either the March 2016 baseline or the March 2017 baseline. The 2016 baselines assumed greater enrollment and larger savings, while the updated baselines more accurately reflect the current landscape. The bill also needs new modeling as the MacArthur/Meadows amendment would restore the ACA’s essential health benefits.

The initial score of the AHCA projected a savings of $337 billion to the federal government, largely by repealing the ACA’s tax credits and Medicaid expansion. It also projected that as many as 24 million Americans would lose their health insurance coverage under the plan, bringing the total uninsured to 52 million. That savings amount was later revised down to an estimated $150 billion, although the new score did not project the bill’s impact on coverage. Unofficial estimates from industry groups expect that the new bill in its current form would likely further increase the uninsured rate beyond the projections of the initial score and result anywhere in less than $100 billion in savings to the federal government or create upwards of $265 billion in new federal spending, as compared to if the ACA were to continue unaltered. Republican leadership likely sought to hold a vote on the legislation before a score could be released given that the update would not be favorable and could cost them from holding a vote once again.

Once the Senate receives the updated CBO score it can begin its own process to consider the bill and start negotiations. The first step is for the Senate to determine which elements of the AHCA meet the requirements of the “Byrd Rule.” Named for former U.S. Senator Robert Byrd of West Virginia, this enumerates which items are eligible for the reconciliation process. There are six categories that would make a provision ineligible for the reconciliation process: it does not increase or decrease revenue or spending; it doesn’t adhere to specified instructions from the budget resolution; it is outside of the committee’s jurisdiction; the spending changes are incidental to the non-budgetary components; it increases the deficit beyond the years instructed through the budget resolution; or it makes changes to social security.

Democrats are likely to contest many of the elements of the AHCA, which would greatly complicate the process as the bill would therefore no longer match the House bill and the two chambers would have to reconcile these differences. The Byrd Rule process could go through the Memorial Day recess and therefore debate on the bill itself is unlikely to begin before June. Many Republican senators have already expressed opposition to the bill or strong reservations, including Senators Rob Portman (R-OH), Lisa Murkowski (R-AK), Susan Collins (R-ME), Dean Heller (R-NV), Shelley Moore Capito (R-WV), Dan Sullivan (R-AK), Ted Cruz (R-TX), Rand Paul (R-KY), Mike Lee (R-UT), James Lankford (R-OK) and Tom Cotton (R-AR)—all for a wide spectrum of reasons, either for the AHCA going too far or for it not going far enough. And there is a very narrow margin for passage in the Senate where Republicans can only afford to lose two votes, assuming that Vice President Mike Pence would cast a tie-breaking vote.

The most likely scenario is for Senate Republicans to work with House Republicans on a compromise bill that could pass both chambers rather than pass their own version and ask the House to take that up, which would once again re-open the complicated process to win support from warring factions in that chamber. Therefore, the conference committee would likely be used to work through any differences. Among the biggest issues of contention is around Medicaid expansion, where many Republican senators have strongly opposed its phase-out while the House Freedom Caucus has opposed any plans that did not phase out the program. The AHCA’s tax credits are also likely to be a major negotiation to provide more relief for lower-income Americans, again where Freedom Caucus members have been less flexible.

It is important to remember that this legislation is still pending, and has not been signed in to law. At this time the ACA and all of its regulations, penalties and enforcements is still the law, and compliance is still required. NAHU is supportive of some of the measures of the legislation, including market-stabilization provisions such as the creation of the Patient and State Stability Fund, establishing strong incentives for continuous coverage, allowing tax credits to be used for catastrophic coverage, and key consumer protection provisions of the ACA like guaranteed-issue coverage and keeping children on their parents’ policies until age 26, as well as Health Savings Accounts. However, we look forward to working with the Senate to provide thoughtful consideration of measures that can be incorporated into the AHCA to ensure the least amount of disruption to the market. NAHU will continue to update you as this legislation moves through the political process to ensure your and your clients’ compliance with the law.