Senate Reveals Health Care Reform Bill

June 23, 2017

Category: Compliance, Benefits

health care reform bill

The U.S. Senate has been considering the House of Representatives’ American Health Care Act (AHCA) since early May, with the goal of repealing the Affordable Care Act (ACA). Some of the major questions the Senate has attempted to address with the latest health care reform effort include:

  • Whether employers are required to offer health insurance
  • If and how the government will continue to subsidize health insurance
  • How individuals can allocate pre-tax dollars toward health care
  • How insurers can design health insurance policies

After a thirteen-member committee’s work over the past two months, the Senate revealed its bill, citing the freeing of Americans from the mandates of Obamacare and introducing more choice in health care as the main benefits of the bill. Former President Obama criticized the bill as a massive tax cut for the wealthy, pointedly explaining that it is: “not a health care bill.”

The Senate’s task was made more difficult when the nonpartisan Congressional Budget Office (CBO) released a report finding that millions of Americans will lose health insurance, the cost of care will likely increase, and the scope of coverage will decrease, under the AHCA. Additionally, there are several factions of Republican Senators who are politically or ideologically uncomfortable with the reforms being proposed.

Conservatives Rand Paul (R-KY), Ted Cruz (R-TX), Mike Lee (R-UT), and Ron Johnson (R-WI) have already expressed opposition to the Senate bill for its similarities to the ACA, but indicated an openness to negotiation. Moderates Lisa Murkowski (R-AK) and Susan Collins (R-ME) have expressed opposition to any bill that fully defunds Planned Parenthood for the 2018 fiscal year (the longest a revenue-only measure could do so), as the AHCA does. Rob Portman (R-OH) and Shelley Moore Capito (R-WV) represent states that have been particularly hard hit by the opioid abuse epidemic, and have stressed the crucial role that Medicaid and federal funding play in combating the problem for their states. Additionally, Dean Heller (R-NV) faces a difficult reelection campaign in 2018 in a swing state where Medicaid expansion has been popular and successful in reducing the percentage of uninsured residents.

What’s New?

To address some of these issues, the Senate’s bill departs from the AHCA in several key ways:

AHCA Senate Bill
States can apply for waivers from the requirement that insurance includes essential health benefits ACA rules sunset 12/31/19 and states can thereafter define essential health benefits
Phase out ACA tax credits and replace with limited credits available to people making up to 400% of the federal poverty line Phase out credits and replace with limited credits available to people making up to 350% of the federal poverty line
Short-term federal funding of over $112 billion to help stabilize insurance companies and marketplace that would be adversely impacted by repeal of ACA Short-term funding of over $161 billion to attempt stabilization
$2 billion to fight opioid addictions $15 billion total for mental health services, approximately $2 billion more for opioids than AHCA
$422 million for community health centers $0 for community health centers
Roll-back of Medicaid expansion immediately, full reversal by 2020, and cuts of over $800 billion in Medicaid funding over the next ten years Roll-back of Medicaid expansion, full reversal by 2024, and stricter limits to federal contributions to Medicaid than the AHCA
State may require work for Medicaid-eligible non-disabled, non-elderly, non-pregnant individuals to obtain coverage, with several other caveats. State may require work for Medicaid-eligible non-disabled, non-elderly, non-pregnant individuals to obtain coverage, without caveats.

Both the AHCA and the Senate bill eliminate the individual penalty for not having insurance established under the ACA, but replace it with a 30% premium surcharge on any person attempting to obtain insurance after a gap in coverage. This surcharge would be paid to the insurance companies, while the existing ACA penalty is paid to the IRS to fund insurance marketplace stabilization.

The Senate bill maintains the AHCA’s elimination of the employer mandate to offer insurance, the phase-out of the small business tax credits for purchasing insurance, the expansion of age-rated bands allowing insurers to charge older people up to five times as much as younger people for the same insurance coverage, the AHCA’s increase in HSA contribution limits, and the full elimination of Planned Parenthood funding for 2018.

Why This Bill? Why Now?

If this bill or something substantially similar passes, it will mean that employers are no longer required to offer and subsidize health insurance. However, the competitive marketplace will mean that employer-sponsored coverage will remain a critical piece of employee compensation and retention. The increases in HSA contributions and the removal of restrictions on the types of plans required to be purchased will also mean that individuals may have greater flexibility in selecting the plan that meets their needs. On the other hand, the cost certainty of the ACA will also be eliminated, which will likely mean increased costs for certain high-cost treatments and services.

Senate Majority Leader Mitch McConnell (R-KY) has indicated an intention to bring the bill up for a vote prior to the Senate’s upcoming summer recess, and to move on from health care reform whether the bill passes or not. However, this same strategy was proposed in the House in March, and while the initial bill was pulled from the floor without a vote and Speaker Paul Ryan declared the health care reform effort over, the bill was eventually passed seven weeks later.  

Health care reform remains a controversial topic. Republicans have expressed an intention to press for major tax reform when the health care efforts are concluded. The expectation is that tax reform will generate less revenue than the current tax structure, meaning that the savings they hope to obtain from health care reform will be important to offset the tax reform plan. For that reason, expect leaders from both the House and Senate to work hard and try to get creative to pass reform, even if some concessions are necessary, to get the aforementioned revenue savings.  


Jordan Mazur is Legal Counsel at Zenefits. As the son of healthcare professionals and small business owners, he is committed to connecting small businesses and their employees with healthcare benefits and HR tools to make their work and lives easier. He is an avid runner and serves as sous-chef to his three-year-old daughter in her culinary experiments.

Category: Compliance, Benefits

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