What You Need To Know About Senate Bill To Repeal, Replace Obamacare

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After weeks of secrecy, Senate Republican leaders have finally released a draft version of the budget resolution they intend to use to repeal and replace much of the Affordable Care Act.

The 142-page bill [PDF], now dubbed the Better Care Reconciliation Act, will likely undergo additional changes in the coming days, as GOP leadership attempts to move forward with a vote before the early July recess.

Like the House version, it seeks to end the mandates that most individuals have health insurance and that most larger employers provide insurance. It does not currently include a provision from the House bill which tried to prevent people from dropping their insurance by dangling the threat of a 30% premium surcharge for people who had let their coverage lapse.

While the House GOP has been suing the government to stop federal ACA subsidies to private insurance companies, the Senate bill would effectively allow these payments to continue through 2021.

In fact, these payments, intended to help insurers keep premiums affordable, will be larger in the coming years. The Senate proposal would pay out $15 billion annually in 2018 and 2019 through this “Short-Term Stabilization Fund,” with that dropping to $10 billion for 2020 and 2021.

The bill also provides for a “Long-Term State Innovation Fund” of $62 billion spread out over 8 years, intended to help states provide coverage for residents in either high-risk or low-income categories.

2021 would also see the end of the Medicaid expansion era that began under the ACA. This is slightly longer than the House had proposed, giving the millions of Americans who are covered by this expansion an extra year or two of coverage, but after 2021 the cuts to Medicaid’s budget would be deeper, potentially affecting millions of additional lower-income Americans.

Just like the House bill, the Senate will provide tax credits to help people purchase their own coverage. Unlike the House bill, which used age as the primary determining factor for the size of the credit, the Senate bill would also include considerations for income, much like current law.

However, it lowers the upper limit of those eligible for this credit, meaning fewer people will able to receive this help. Currently, the law allows for some credit to be claimed for people who earn up to 400% of the poverty line. The Senate bill seeks to drop that ceiling to 350%.

For those eligible for a tax credit, premium costs could effectively go up while insurance companies would not be required to meet the same standard of coverage as under current law. The bill resets the “benchmark” level of coverage for people who received subsidies. Under current law, a benchmark plan covers about 70% of expected health costs. Under the Senate proposal, that requirement would drop to 58%.

At the same time, the law would require subsidy recipients to pay higher percentages of their premiums. So, if passed, affected Americans could be paying more for insurance that covers less, meaning more out-of-pocket expenses when they seek medical care.

It’s not yet known how these changes will impact the number of Americans who will likely lose or drop coverage if this bill passes. The nonpartisan Congressional Budget Office has been given this draft proposal and senators hope to get a CBO estimate on the bill’s effects sometime before a vote. In a statement on its website, the CBO would only say that it expects to release that score “early next week.”

The Senate is also leaning heavily on expanded use of Health Savings Accounts as a way for Americans to pay for their coverage. However, critics of this plan have argued that HSAs only benefit those who can afford to save significant portions of their income. Lower-income Americans or people with significant expenses who aren’t able to contribute to an HSA would have difficulty taking advantage of this change to the law.

In addition to repealing taxes on medical device makers, insurers, and (of course) tanning salons, the Senate bill also includes a controversial repeal of a Net Investment Income Tax on earnings from things like interest, dividends, capital gains, and annuities.

This 3.8% tax only applies to individuals earning more than $200,000 per year or married couples earning a total of $250,000. Not only does the Senate bill seek to completely repeal this tax going forward, it would retroactively apply that repeal to cover all earnings since the beginning of 2017. Critics of this repeal say it is a giveaway to America’s wealthiest, while supporters contend it discourages and burdens investment.

In terms of the ACA’s Essential Health Benefits — those insurance benefits that insurers must provide under current law — the Senate appears to be following the House lead by allowing states the opportunity to determine what is considered “essential” for coverage in that state.

Though the bill doesn’t explicitly name Planned Parenthood, it includes a one-year federal funding freeze on all organizations that meet the very specific description of an organization that is Planned Parenthood. This is similar to the approach taken in the House.

The Senate also retained language from the House bill that prohibits use of federal subsidies for insurance plans that cover abortion procedures. That could be problematic, as the GOP is attempting to push the repeal legislation through as a budget resolution, meaning Republicans would not need the traditional 60 votes in the Senate to end a Democratic filibuster. However, there are parliamentary rules about what can and can’t be done within the confines of a budget resolution bill.

Moving forward with the abortion-restricting language could cross that line into actual policy-making, though it’s unclear if the Senate Parliamentarian will see it that way, and, if so, whether Senate leadership would heed the Parliamentarian’s concerns.

Conversely, if the bill were to drop that language, there are indications that some hardline conservative GOP members may pull their support for the legislation.

Like the House bill, the Senate will allow insurers to put more of a financial burden on older Americans. The law currently allows insurers to charge its oldest customers premiums that are up to three times as high as policyholders in their prime. Both House and Senate versions of the repeal bill would raise let insurers increase that ratio so that older patients can be charged up to five times their younger counterparts.

As the CBO noted in its various scores of the House version of the bill, this may result in lower or stable premiums for younger Americans but will significantly increase the cost for older people.

What about preexisting conditions? The Senate bill appears to bar insurance companies from reverting to its pre-ACA tendency of denying coverage or charging excessive premiums to Americans with pre-existing conditions. It also retains the ACA’s requirement that young adults be allowed to remain on their parents’ plans until the age of 26.

While these are both popular aspects of Obamacare, the CBO and others have repeatedly pointed out that these positives were effectively paid for by the individual and employer coverage mandates. The idea was that if everyone, including the young and healthy, has to buy insurance then the insurance companies wouldn’t be overwhelmed by the costs of covering high-risk patients or allowing young people to remain on family plans well past traditional college-age.

These are the main points of the bill. We’ll continue to dig into the finer details and follow whatever changes the GOP makes in the coming days.

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