What’s next after Senate defeat of latest ACA repeal effort?

The Senate early in the morning of Friday, July 28, 2017, voted 49-51 to defeat the Health Care Freedom Act, which would have repealed targeted provisions of the Affordable Care Act (ACA). Three Republican Senators joined all Democrats in voting against the legislation, prompting Senate Majority Leader Mitch McConnell (R-KY) to pull the bill from the Senate schedule. Leader McConnell and Speaker of the House Paul Ryan (R-WI) have not indicated how they will proceed on legislation related to the ACA.

The House adjourned for its August recess from Friday, July 28, 2017, through Tuesday, September 5, 2017. Leader McConnell has said the Senate will adjourn Friday, August 8, 2017, through Tuesday, September 5, 2017.

Legislative focus in Congress now is widely expected to pivot to tax reform. With taxes enacted as part of the ACA remaining in effect, Congress could consider changes to some health care-related tax provisions in a tax reform debate. Issues that could be considered include contribution limits to health savings accounts, the individual tax exclusion for employer-sponsored coverage, and the ACA’s excise tax on high cost employer-sponsored coverage (Cadillac tax), medical device excise tax, health insurer fee, and branded prescription drug fee.

In addition, the Senate in the coming weeks is poised to take up the House-passed reauthorization of the user fee agreements to help fund operations at the Food and Drug Administration (FDA), and legislation is needed to reauthorize the Children’s Health Insurance Program (CHIP). Both the FDA user fee agreements and the current CHIP authorization expire September 30, 2017, the same date that funding for the federal government expires.

Questions over the individual health insurance market

The Senate’s rejection this week of legislation to repeal and replace provisions of the ACA underscores concerns about the nongroup health insurance market, especially what position the Trump Administration will take on payment of cost-sharing reduction subsidies (CSRs) to health plans offering products through ACA Exchanges. CSRs are available to reduce out-of-pocket costs for individuals with incomes that do not exceed 250% of the federal poverty level who enroll in eligible Exchange plans.

The House of Representatives in 2014 sued the Obama Administration over payment of the CSRs, arguing that the Administration could not make payments to health plans for CSRs without legislative authorization by Congress. Lower courts ruled in favor of the House, and the case is currently pending before a panel of the Sixth US Court of Appeals awaiting a decision on whether the Trump Administration will continue to defend the case. If the Administration declines to continue to defend the lawsuit and Congress does not appropriate funds for the payments to health plans, insurers in some cases could withdraw from their contracts or decline to participate in Exchanges going forward. In several recent Tweets, President Trump has raised the possibility of stopping the CSR payments.

Health plans could seek resolution of this issue before the August 16, 2017 deadline to set their final rates for the 2018 benefit year on ACA Exchanges. States have until September 27, 2017, to review plans’ rates and submit final approved rates to the Centers for Medicare and Medicaid Services (CMS).

Open enrollment on ACA Exchanges for the 2018 benefit year will begin November 1, 2017, and run through December 15, 2017.

Authors:

Anne Phelps
Principal | Deloitte Risk and Financial Advisory
US Health Care Regulatory Leader
Deloitte & Touche LLP
Latest conversations from Anne Phelps on Twitter

Daniel Esquibel
Senior Manager | Deloitte Risk and Financial Advisory
Deloitte & Touche LLP

This publication contains general information only and Deloitte is not, by means of this publication, rendering accounting, business, financial, investment, legal, tax, or other professional advice or services. This publication is not a substitute for such professional advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified professional advisor.

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