ACA Repeal and Replace Update: Detailed analysis

June 26, 2017

Like the American Health Care Act (AHCA), the Senate proposal would provide “refundable” and “advanceable” tax credits for individuals to help lower the cost of purchasing insurance; however, unlike the AHCA, the Better Care Reconciliation Act (BCRA) would tie the tax credits to BOTH age and income. The AHCA health insurance tax credits would only be available to individuals based on their age. 

The Senate proposal would limit the tax credits to individuals with incomes up to 350% of the federal poverty level (the Affordable Care Act goes to 400% of poverty).  Unlike the Affordable Care Act (ACA) tax subsidies, which are only available to individuals with incomes between 100 and 400 percent of poverty, the BCRA tax credits would be available to individuals with incomes below 100 percent of poverty.

Both the AHCA and the BCRA would allow states to voluntarily expand Medicaid coverage to healthy individuals with incomes up to 138% of poverty; however, the Senate proposal would phase-down the current subsidies (the federal government under the ACA covers 90% of the cost of these individuals) at a more gradual rate that the AHCA. 

Like the AHCA, the BCRA would move Medicaid from an open-ended funding formula (the federal government pays a percentage of total state-by-state Medicaid spending) to a new “per-capita cap” formula.  The federal government would continue to cover the same percentage of Medicaid spending in each state; however, total state spending would be “capped” using a per-capita formula.  Under the House-passed bill, the per-capita cap would grow annually at the medical inflation rate whereas the Senate leadership discussion draft would grow the annual per-capita cap at the general rate of inflation (i.e. all goods and services, not just health care). 

Similar to the House-passed ACA repeal and replace bill, the Senate proposal would give states the option of imposing a work requirement as a condition of receiving Medicaid benefits if the individual is deemed “able bodied”. 

Both the AHCA and the BCRA would give states greater flexibility in determining what types of insurance could be sold that would still qualify for the aforementioned tax credits. Under the ACA, individuals are only eligible for premium subsidies if they purchase health insurance through an Exchange and the policy met certain minimum benefit requirements (aka essential health benefits).  The tax credits available in both the AHCA and the BCRA would be available as long as the individual/family purchases health insurance approved for sale by the state, regardless of whether it was done through an exchange or on the open market. 

The AHCA and BCRA would give states the flexibility to design alternative benefit packages with fewer “essential health benefits” but unlike the AHCA, the BCRA would NOT allow states to waive the community rating requirement. Both the AHCA and the BCRA would adjust the so-called rate bands (the differential between the highest cost plan and the lowest cost plan) from the 3:1 ratio in the ACA to 5:1.