AHCA in a Nutshell

March 17, 2017

A quick breakdown of the first draft of the bill

Earlier this month the House of Representatives laid out the initial draft of the American Health Care Act (AHCA). If approved, the much-anticipated legislation will repeal and replace several key aspects of the Affordable Care Act (ACA) enacted by the incumbent Obama administration. Though the process is still early, healthcare industry leaders are interested in how the new bill might eventually affect the dynamics of care. The following is a list is a summary of the AHCA’s most notable features.

Phasing out of the Medicaid expansion – On December 31, 2019 the ACA’s Medicaid expansion will end. This includes the state option to extend Medicaid coverage to adults above 133% of the federal poverty level. Federal Medicaid funding will transition to a “per capita cap” system that provides states with a capped amount of Medicaid funds per enrollee.

Repeal the individual mandate – The tax penalties under the ACA for individuals who fail to maintain minimum health insurance coverage will be repealed. Rather, in order to encourage continuous enrollment, a 30% penalty on premiums for lapses in insurance coverage will be imposed.

Repeal the employer mandate – The employer mandate, which applied to certain employers that had more than 50 full-time employees on staff, will be repealed for 2016 retroactively.

Refundable tax credits instead of subsidies – The subsidies to mitigate insurance premium costs for qualifying individuals under the ACA will be replaced by a refundable tax credit system. Tax credits will be issued based on age, and at certain income levels, the tax credits will be phased out altogether.

Repeal of various ACA taxes and fees – Certain ACA-related taxes will be repealed, such as on health insurers, medical devices, branded prescription drugs (beginning in 2018), and tanning salons. The ACA’s “Cadillac” tax on high-cost health insurance plans would remain, but will be delayed until 2025 under the AHCA.

Reversal of cuts to DSH payments – The ACA’s planned cuts to disproportionate share hospital (DSH) payments will not go into effect.

Defunding certain organizations – Certain nonprofit organizations that provide pregnancy termination services such as Planned Parenthood will not receive Medicaid reimbursements.

Establishment of the “Patient and State Stability Fund” – A $100 billion fund will go to states for providing aid for high-risk individuals and stabilizing health insurance costs in the individual market.

Increase in age variation – The age band rating in healthcare premium rates will increase to a 5:1 ratio (up from the ACA’s 3:1), permitting insurance companies to charge older patients up to five times as much as younger patients.

The bill is still a considerable ways off from becoming enacted into law, and it will most likely be revised before a final version emerges. In the meanwhile, organizations should refrain from making any major revisions to their existing workflows in anticipation of legislative change until the final mandate is announced. Valant will be monitoring developments closely and will provide any pertinent updates as they affect behavioral health.

*Information sourced from Dr. D Derek Jones, PhD, MHA

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Last Updated: January 19, 2018