March 13, 2017 Weekly Legislative Update

Tax Reform Timing Linked to Obamacare Repeal

House GOP leaders made their first move to repeal and replace Obamacare in a budget reconciliation bill to be marked up Wednesday—the result will go a long way to providing a budget baseline for tax reform.

Ways and Means marked up “Budget Reconciliation Recommendations To Repeal and Replace Obamacare,” at the same time, Energy and Commerce marked up “Budget Reconciliation Recommendations Related To Repeal and Replace the Patient Protection and Affordable Care Act.”

The committees have concurrent jurisdiction and both marked up the same draft finalized by leadership after last-minute changes to win support of conservative and moderate wings.

Democrats will have much to object to—under the draft, Medicaid expansion would be repealed after 2020 and Medicaid would become a block grant to the states; tax credits to help low-income households will be refundable but not “advance” refundable; the number of people who will lose their current insurance, or access to insurance, hasn’t been calculated.

The Speaker’s goal is to wrap up passage of an Obamacare repeal and replace bill before departing for Easter recess on April 7.  In the Senate, the bill cannot be filibustered and can pass with 51 votes, but with the Senate divided 52-48 and several GOP senators hostile to curtailing Medicaid, the bill could stall there.

Speaker Ryan plans to use the same reconciliation process to pass tax reform, only this time with the FY 2018 budget resolution.   Under the Budget Act the resolution must be passed by April 15, but that deadline often extends into May, and in this case, it’s likely because other priorities are getting in the way—raising the debt ceiling, and passing a continuing resolution to fund the government.

Still, if Speaker Ryan and President Trump carry the day and the bill to repeal Obamacare passes the House by April 7, an FY 2018 budget resolution could pass both houses of Congress by May 15 and we could see a tax reform bill proposed for markup in June.

House Republicans Release ACA Repeal and Replace Bill

The House Republican leadership released the ACA repeal and replace bill that they intend to pass through the budget reconciliation process, entitled the American Health Care Act (“AHCA”).

We wanted to share with you this useful New York Times article providing a side by side analysis of how a number of key provisions of the ACA are treated under the current draft of the AHCA.  As can be seen from the piece, the AHCA does not (and, because of the limits on reconciliation, cannot) repeal the ACA in its entirety.  Rather the AHCA retains a number of the most popular provisions of the ACA and either repeals or retools others.

Unlike the prior leaked draft, the AHCA does not include a cap on the exclusion for employer-sponsored health insurance premiums, which members of both parties had raised concerns about.  However, the AHCA has already drawn criticism from the far right members of the

Republican party who see the proposal’s refundable tax credit as a welfare entitlement.  Moreover, the AHCA includes significant cuts to Medicaid which could prove a sticking point in the Senate where it will need fifty votes to pass and, earlier this year, four Republican Senators (Capito, Gardener, Portman, and Murkowski) signed a letter to Majority Leader Mitch McConnell expressing their opposition to significant Medicaid cuts.  In other words, the debate over, and political challenges surrounding, the AHCA’s contents have only just begun.

We will continue to review the proposal and keep you apprised as the debate over the AHCA progresses.      

House Republicans Unveil Plan to Replace Health Law

“The New York Times”

By Robert Pear and Thomas Kaplan - March 6, 2017

WASHINGTON — House Republicans unveiled on Monday their long-awaited plan to repeal and replace the Affordable Care Act, scrapping the mandate for most Americans to have health insurance in favor of a new system of tax credits to induce people to buy insurance on the open market.

The bill sets the stage for a bitter debate over the possible dismantling of the most significant health care law in a half-century. In its place would be a health law that would be far more oriented to the free market and would make far-reaching changes to a vast part of the American economy.

The House Republican bill would roll back the expansion of Medicaid that has provided coverage to more than 10 million people in 31 states, reducing federal payments for many new beneficiaries. It also would effectively scrap the unpopular requirement that people have insurance and eliminate tax penalties for those who go without. The requirement for larger employers to offer coverage to their full-time employees would also be eliminated.

People who let their insurance coverage lapse, however, would face a significant penalty. Insurers could increase their premiums by 30 percent, and in that sense, Republicans would replace a penalty for not having insurance with a new penalty for allowing insurance to lapse.

House Republican leaders said they would keep three popular provisions in the Affordable Care Act: the prohibition on denying coverage to people with pre-existing conditions, the ban on lifetime coverage caps and the rule allowing young people to remain on their parents’ health plans until age 26.

Republicans hope to undo other major parts of President Barack Obama’s signature domestic achievement, including income-based tax credits that help millions of Americans buy insurance, taxes on people with high incomes and the penalty for people who do not have health coverage.

Medicaid recipients’ open-ended entitlement to health care would be replaced by a per-person allotment to the states. And people with pre-existing medical conditions would face new uncertainties in a more deregulated insurance market.

The bill would also cut off federal funds to Planned Parenthood clinics through Medicaid and other government programs for one year.

“Obamacare is a sinking ship, and the legislation introduced today will rescue people from the mistakes of the past,” said Representative Kevin McCarthy of California, the majority leader.

Democrats denounced the effort as a cruel attempt to strip Americans of their health care.

“Republicans will force tens of millions of families to pay more for worse coverage — and push millions of Americans off of health coverage entirely,” said Representative Nancy Pelosi of California, the Democratic leader.


Under Obamacare

House Republican bill

Individual mandate



The Affordable Care Act requires people who can afford it to obtain health insurance or face tax penalties. This part of the law was meant to keep insurance affordable for those who are older or sick.

The Republican bill would eliminate the individual mandate, which means that people would not have to pay a penalty if they went without insurance. One possible effect, though, is that healthy people might be less likely to buy insurance, driving up prices for those who need it most, like older people and the sick. To limit this, the plan proposes a “continuous coverage incentive,” which would charge people in the individual market a 30 percent penalty for lapses in health insurance coverage.


Employer mandate



Larger companies must provide affordable insurance to their employees or face financial penalties.



Subsidies for out-of-pocket expenses



The federal government provides tax credits to help some people pay deductibles and make co-payments.

Would repeal this so-called cost-sharing subsidy in 2020.


Premium subsidies



The federal government provides tax credits to middle-income Americans on a sliding scale according to income, to help offset the cost of premiums and deductibles.

Would change the way subsidies are distributed by using age, instead of income, as a way to calculate how much people receive. Tax credits would be available in full to individuals earning less than $75,000 and households earning less than $150,000, but they would be capped for higher earners. The subsidy would be $2,000 for a person under 30, and double that for people over 60. The bill would also expand the health plans that qualify for subsidies.

Medicaid expansion



More than 30 states expanded Medicaid coverage by raising the eligibility cutoff to 138 percent of the poverty level.

Would let states keep Medicaid expansion and allow states that expanded Medicaid to continue getting federal funding as they would have under the A.C.A., until 2020. Federal funding for people who became newly eligible starting in 2020 or who left the program and came back, however, would be reduced. The bill also proposes capping federal funding per enrollee, based on how much each state was spending in 2016.


Health savings account



In 2017, an individual can put $3,400 and a family $6,750 into a tax-free health savings account.

Would allow people to put substantially more money into their health savings accounts and let spouses make additional contributions. The basic limit would be at least $6,550 for an individual and $13,100 for a family beginning in 2018.


Restrictions on charging more for older Americans



Plans can charge their oldest customers only three times the prices charged to the youngest ones.

Would allow insurers to charge older customers five times as much as younger ones and give states the option to set their own ratio.


Dependent coverage until 26



Children can stay on their parents’ insurance policies until age 26.


Pre-existing conditions policy



Requires insurers to cover people regardless of pre-existing medical conditions and bars the companies from charging more based on a person’s health history.


Essential health benefits



All insurers must offer 10 essential health benefits, including maternity care and preventive services.


Prohibitions on annual and lifetime limits



Insurers are barred from setting a limit on how much they have to pay to cover someone.


Two House committees — Ways and Means and Energy and Commerce — plan to take up the legislation on Wednesday. House Republicans hope the committees will approve the measure this week, clearing the way for the full House to act on it before a spring break scheduled to begin on April 7. The outlook in the Senate is less clear. Democrats want to preserve the Affordable Care Act, and a handful of Republican senators expressed serious concerns about the House plan as it was being developed.

Under the House Republican plan, the income-based tax credits provided under the Affordable Care Act would be replaced with credits that would rise with age as older people generally require more health care. In a late change, the plan reduces the tax credits for individuals with annual incomes over $75,000 and married couples with incomes over $150,000.

Republicans did not offer any estimate of how much their plan would cost, or how many people would gain or lose insurance. The two House committees plan to vote on the legislation without having estimates of its cost from the Congressional Budget Office, the official scorekeeper on Capitol Hill.

But they did get the support from President Trump that they badly need to win House passage.

“Obamacare has proven to be a disaster with fewer options, inferior care and skyrocketing costs that are crushing small business and families across America,” said the White House press secretary, Sean Spicer. “Today marks an important step toward restoring health care choices and affordability back to the American people.”

The release of the legislation is a step toward fulfilling a campaign pledge — repeal and replace — that has animated Republicans since the Affordable Care Act passed in 2010. But it is far from certain Republican lawmakers will be able to get on the same page and repeal the health measure.

Monday, four Republican senators — Rob Portman of Ohio, Shelley Moore Capito of West Virginia, Cory Gardner of Colorado and Lisa Murkowski of Alaska — signed a letter saying a House draft that they had reviewed did not adequately protect people in states like theirs that have expanded Medicaid under the Affordable Care Act.

Three conservative Republicans in the Senate — Mike Lee of Utah, Rand Paul of Kentucky and Ted Cruz of Texas — had already expressed reservations about the House’s approach.

In the House, Republican leaders will have to contend with conservative members who have already been vocal about their misgivings about the legislation being drawn up. “Obamacare 2.0,” Representative Justin Amash, Republican of Michigan, posted on Twitter on Monday.

Representative Mark Meadows, Republican of North Carolina and the chairman of the conservative House Freedom Caucus, also offered a warning on Monday, joining with Mr. Paul to urge that Republican leaders pursue a “clean repeal” of the health care law.

“Conservatives don’t want new taxes, new entitlements and an ‘ObamaCare Lite’ bill,” they wrote on the website of Fox News. “If leadership insists on replacing ObamaCare with ObamaCare-lite, no repeal will pass.”

The move to strip Planned Parenthood of funding and the plan’s provisions to reverse tax increases on the high-income taxpayers will also expose Republicans in more moderate districts to Democratic attacks.

The bill would provide each state with a fixed allotment of federal money for each person on Medicaid, the federal-state program for more than 70 million low-income people. The federal government would pay different amounts for different categories of beneficiaries, including children, older Americans and people with disabilities.

The bill would also repeal subsidies that the government provides under the Affordable Care Act to help low-income people pay deductibles and other out-of-pocket costs for insurance purchased through the public marketplaces. Eliminating these subsidies would cause turmoil in insurance markets, insurers and consumer advocates say.

However, the House Republicans would provide states with $100 billion over nine years, which states could use to help people pay for health care and insurance.

The tax credits proposed by House Republicans would start at $2,000 a year for a person under 30 and would rise to a maximum of $4,000 for a person 60 or older. A family could receive up to $14,000 in credits.

Even with those credits, Democrats say, many people would find insurance unaffordable. But Republicans would allow insurers to sell a leaner, less expensive package of benefits and would allow people to use the tax credits for insurance policies covering only catastrophic costs.

While Republicans have argued over how to proceed, Mr. Trump has expressed only vague goals for how to repeal the Affordable Care Act and improve the nation’s health care system. On Capitol Hill, lawmakers and their aides are waiting to see whether he uses his platform, Twitter account and all, to press reluctant Republicans to get behind the House plan.

The new version of the House Republican bill makes several changes to earlier drafts of the legislation.

It drops a proposal to require employees with high-cost employer-sponsored health insurance to pay income and payroll taxes on some of the value of that coverage. In addition, it would delay a provision of the Affordable Care Act that imposed an excise tax on high-cost insurance plans provided by employers to workers.

Congress had already delayed this “Cadillac tax” — despised by employers and labor unions alike — by two years, to 2020. The new legislation would suspend the tax from 2020 through 2024.

House Republicans would offer tax credits to help people buy insurance if they did not have coverage available from an employer or a government program. Under earlier versions of the bill, the tax credits increased with a person’s age, but would not have been tied to income. Backbench Republicans said the government should not be providing financial assistance to people with high incomes.

Accordingly, under the new version of the bill, the tax credits would be reduced and eventually phased out.

Regulation Guide

During President Trump’s first month in office, there has been much discussion about repealing and rolling back Obama-era regulations.

Trump has already issued two executive orders on regulations – one placing a moratorium on pending rules and the other instructing agencies that for each new rule they create they must eliminate two existing rules.  Meanwhile, the Republican controlled House and Senate have both held votes to roll back a number of regulations that were finalized during the last months of the Obama Administration (two of which have passed both the House and Senate).  

The many statements and promises being made and approaches being utilized in this context have created a great deal of confusion about what can and cannot be done with respect to different regulations.  

In an effort to help you understand what is going on, we have prepared the attached chart to distill the regulatory process and outline each potential scenario.  We hope this will be a useful tool in the months ahead.