The U.S. House of Representatives passed the American Health Care Act of 2017 (AHCA, H.R. 1628) on May 4, 2017. The bill aims to take advantage of congressional budget processes as a beginning to the repeal and replacement of the Affordable Care Act. The Administration has described it as part of a three-pronged process that also would include administrative changes and additional legislation. AHCA was introduced on March 6, 2017 and consideration of the bill was postponed on March 24 after House leadership determined that it did not possess enough support to pass.

The underlying bill was the subject of a detailed analysis by the Congressional Budget Office in March that found that, on net, enacting the legislation would decrease federal deficits by $337 billion over the next ten years. That change would result from a $1.2 trillion decrease in direct spending, partially offset by an $883 billion reduction in revenues. While the bill would have decreased federal deficits, it also would decrease the number of people with health insurance. Specifically, in 2018, 14 million more people would be uninsured under the legislation than under current law. That number would rise to 24 million by 2026.

In late April to early May 2017, two amendments were introduced to the bill which were designed to overcome both conservative and moderate Republican opposition to the bill. These amendments, introduced principally by Rep. MacArthur of New Jersey and Rep. Upton of Michigan, are detailed below.

It should be noted that, as of this post, the Congressional Budget Office has not publicly released a report on the budgetary implications of these amendments. However, except for the $8 billion in additional funding in the Upton amendment, it is not clear whether or how any of the changes in the MacArthur amendment would affect the deficit.

Upton Increases Funding for Patient and State Stability Fund

Rep. Upton’s amendment is designed to provide supplemental funding to the Patient and State Stability Fund to allow people with preexisting conditions to purchase insurance. This amendment provides an additional $8 billion for 5 years, beginning in 2018 for states who have elected to waive the community rating requirements and allow for pricing based on health status.

We expect that CBO will reduce its prior estimate of the savings resulting from AHCA by the $8 billion in additional spending. It is also likely that CBO will reduce the number of uninsured individuals based on this additional spending. However, it is unclear how significant an impact $8 billion will have on the number of uninsured because CBO may compare the Patient and State Stability Fund to other high risk pools, and some analyses have found those risk pools to be ineffective.

MacArthur Amendment Helps Secure Passage of AHCA

To “encourage fair health insurance premiums,” the MacArthur amendment allows states to apply to the Secretary of Health and Human Services to allow health plans offered on the individual market to:

1. Increase the difference in premiums between their oldest and youngest enrollees
2. Offer fewer benefits under the plan than would otherwise be required, and/or
3. Take the health status of individuals who have a lapse in health insurance into account in determining the premium for the plan

Waiver applications must specify how the waiver will accomplish one or more of the following goals:

• Reducing average premiums for insurance in the state;
• Increasing enrollment in health insurance;
• Stabilizing the market for health insurance;
• Stabilizing premiums for pre-existing conditions; and/or
• Increasing the choice of health plans in the state.

Waivers cannot last for more than ten years, unless the state requests a continuation. These waivers will be automatically approved if not denied by the Secretary within 60 days.

The Freedom Caucus endorsed the AHCA after adoption of the MacArthur amendment. This could have secured as many as 30 votes toward passage of the bill. It appears that the only Freedom Caucus member to vote against the bill is Rep. Andy Biggs (R-AZ). According to the Freedom Caucus Chair, “the MacArthur amendment will grant states the ability to repeal cost driving aspects of Obamacare left in place under the original AHCA.”

If the Congressional Budget Office agrees the additional flexibility provided to states will—

• increase the availability of health insurance in markets where it would otherwise have been unavailable; and/or
• result in lower health insurance costs for patients,

it could find that the MacArthur amendment reduces the number of people without health insurance without increasing the costs of the AHCA.

On the other hand, CBOs prior estimate of the AHCA assumed a relatively stable insurance market. Therefore, CBO may discount the intended effects of the MacArthur amendment, leaving its effects to be mainly political.

Applied Policy will continue to monitor developments on health reform. If you have any questions about how these changes could affect your business and the patients you serve, contact us at gpugh@appliedpolicy.com or 202-558-5272.