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June 26, 2017

Health Care Reform

By Scott Lyon, Senior Vice President

Having spent Monday – Wednesday of last week in Washington, D.C. meeting with several members of the Michigan Senate and House delegation, discussion of health care reform was at the top of our agenda.  In each meeting we reminded folks that cost is the problem and anything that does not get at the root cause of the issue will be met with severe skepticism on our part.  

From those conversations we knew the Senate would be releasing their discussion draft for health care reform on Thursday, June 22.  The Senate released the Better Care Reconciliation Act (BCRA) and while it closely resembles the American Health Care Act approved by the House of Representatives in May, there are some key differences.  Both target the Affordable Care Act for repeal.  But what happens next is still an open question as the Senate has a few options; because this bill is being done via reconciliation the debate will be limited to just 20 hours, split between the Republicans and Democrats.  

Amendments can be offered following debate and the timeline for that is pretty unknown. Once the Senate wraps this up, the bill goes back to the House.  If the language is exactly the same as the House version, which is considered unlikely, the legislation can be sent along to the President for his consideration.   More likely, the House could concur with the Senate version, or tweak the Senate version and send it back, or a conference committee could be established between the Senate and the House to work through the differences and craft compromise legislation.  We will see.  

Like my message when the House passed the American Health Care Act, until President Trump takes pen to paper and signs something into law, the Affordable Care Act is still the law of the land and all of its provisions still remain.

Here is a thumbnail outline of what is in the Better Care Reconciliation Act for small business:

  • Eliminates the Individual and Employer Mandates, by reducing the penalty to zero and lightens the reporting requirements for companies with 50 or more employees.
  • Maintains the basic structure of premium assistance from the ACA, but tightens the eligibility criteria starting in 2020.
  • Pre-existing conditions would still be covered; however, if an individual lets coverage lapse, they must wait six-months to reenroll.  
  • Raises Health Savings Account contribution limits, essentially doubles them to $6,650 for an individual and $13,300 for a family.
  • Repeals the ACA imposed limits of contributions to Flexible Spending Accounts and allows over-the-counter medications to qualify for reimbursement.
  • Expands rate bands (the distance from the lowest premium to the highest) from 3:1 to 5:1
  • Maintains the ability for a dependent to remain on their parent’s health plan until age 26.
  • Maintains the ACA market reforms including the first dollar coverage for preventive care, prohibition on annual or lifetime dollar limits of health plans.
  • Delays the implementation of the Cadillac Tax until 2026.
  • Ends the ACA imposed taxes on health insurance companies, pharmaceutical manufacturers, and medical devices which get passed along in premiums.
  • Provides for a more gradual phase-out of Medicaid Expansion than the House version, limits the federal funding of Medicaid in future years and gives states the option of either block grants or per capita for Medicaid funding beginning in 2020.
  • Provides for a “Short-Term Stabilization Fund” to help balance premium costs.
  • Continues cost-sharing reductions and provides $62 billion over eight years for a “Long-Term State Innovation Fund” to encourage high risk pools for individuals with serious/chronic medical conditions.

Staying in our lane as an advocate for small business, some quick observations are that the bill does not appear to be helpful in reducing the costs of health insurance or health care, which is of course the root problem. Eliminating the individual mandate while retaining guaranteed issue without a waiting period will most likely result in a sicker pool of those insured in the individual market leading to higher premiums for everyone having insurance, including the small group market. The Cadillac Tax is delayed, not eliminated. Think about that one for a minute – if this bill gets signed into law, we have no mandate on employers to offer coverage to their employees, but if an employer decides to offer a plan that costs too much they get nailed with a 40% excise tax. That is crazy.  The changes to Medicaid, while not directly a small business issue, could become one if the funding is cut.  Today over 600,000 Michigan residents get health coverage via the Healthy Michigan Plan (expanded Medicaid). While a direct cause and effect is not possible, if providers (hospitals and doctors) have more uninsured patients that puts pressure on their negotiations with insurers, and they will cost shift to those insurers, which in turn raises rates for the insured market, including small businesses.

Stay tuned as the debate is about to ramp up.  Reconciliation requires just 50 votes in the Senate and the Republicans hold 52 seats.  However, as of today, four have already said they do not believe the Better Care Reconciliation Act goes far enough in its repeal of the ACA.  The “Majority Leader McConnell balancing act” to try to get these four on board and not lose moderate Republicans will be interesting.  While Democrats and the news media will report that this is being done without debate, or without enough debate, the chances of a single Democrat getting on board with any part of this bill is practically null. The Republican leadership in the Senate and House know this and have essentially made the decision that they will not bother with committee hearings and debates since they understand the negotiation is within their own caucus. 

The next couple of weeks will be interesting and we will do our best to keep you up to speed with how this round of health care reform is likely to impact your small business.  If you have any questions, please contact SBAM at (800) 362-5461. 

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