Monthly Archives: May 2017

SUMMARY:

• Budget Reconciliation allows Senators to pass measures with 51 votes rather than 60
• Provisions in the AHCA may be deemed extraneous under Senate Byrd Rule
• ACA Reporting Requirement cannot be eliminated through reconciliation
• The Recent CBO report spells difficulty for the Repeal effort moving forward

Recent headlines have been littered with phrases such as: “Budget Reconciliation”, “Byrd Rule”, “CBO Reports”, and “Filibuster” etc etc. What does it all mean? How does it tie together and most importantly how does this affect those working in the insurance industry?

Budget Reconciliation???

To start, let’s take a look at what budget reconciliation is. Simply put, Budget Reconciliation is a process that allows Congress to make changes more quickly than under regular rules (See Figure 1). Every year Congress is required to adopt an annual budget resolution. This serves as Congress’s statement on items such as: revenue, debt limits, and expenditures. Congress uses this to set federal spending goals for the next five years. When additional legislation that affects spending is needed beyond that which is normal, Congress can use the process known as Budget Reconciliation. Why are we talking about this? This is what Republicans in Congress are currently using in an attempt to pass new healthcare legislation in the Senate. Republican lawmakers are hoping that this can accelerate the process and lower the number of needed votes in order to pass the new law.

Why are Republicans using this to Pass Healthcare Reform???

Under normal Senate rules, there is no defined amount of time for debate on each bill. 60 Senate votes are required to end debate and move into an up or down vote on legislation. This means that any single Senator can speak on and on forever on a bill thus thwarting its ability to move forward into law. This is known as a filibuster.

Here’s the key to Budget Reconciliation. The Budget Act limits the Senate debate time on reconciliation measures to 20 hours. After 20 hours, the debate ends. This means that under budget reconciliation a total of only 51 votes are needed in order to pass measures as opposed to the standard 60 that would be needed to overcome a filibuster. If you’ve been paying attention you will know that Republicans in Congress do not currently hold 60 seats, so this is their best option for passing healthcare reform. Under Reconciliation, Republicans can pass legislation without the help of any Democrats. In addition to these limits the Senate also operates under rules that govern the subject matter of reconciliation. These limits are outlined in the Byrd Rule.

The Byrd Rule???

The Byrd Rule serves to set limits on the subject matter that can be considered under any reconciliation matter. A provision is considered extraneous if:

• It does not produce a change in expenditures or revenues.
• The net effect of the provisions reported by the committee fails to achieve the reconciliation instructions.
• It is outside the instructed committee’s jurisdiction.
• It produces changes in expenditures or revenues that are only incidental to the non-budgetary components of the provision.
• It increases or decreases net expenditures or revenues during a fiscal year that is not covered by the reconciliation instructions.
• It recommends changes to Social Security.

The Byrd Rule in the Media

The Byrd rule is being talked about so much in the media because some opponents of the AHCA claim that one of the key provisions of the AHCA should be considered “Extraneous” under the Byrd Rule and therefore cannot be contained in a Budget Reconciliation bill. This provision is the 30% penalty imposed on those individuals who do not maintain continuous coverage throughout the year.

Under the AHCA bill, insurance companies in certain states can charge a member 30% more for their premiums if coverage is not maintained in the previous year. Since this extra money would go to insurance companies rather than the federal government (as it does under the ACA’s individual mandate) the provision may be considered out of conformity with Senate regulations. Without the 30% provision, the AHCA falls apart as insurance risk pools become unbalanced and people wait to buy insurance until they are very sick.

Reconciliation Limits on Repealing Reporting Requirements

Additionally, a little known fact is that even though the proposed healthcare bill reduces the Individual and Employer penalties to $0, it cannot remove the requirement to report qualified offers of coverage. What this means is that budget reconciliation cannot be used to change the current reporting requirements under the ACA. Additionally, marketplace premium tax subsidies are proposed to stay in place until the year 2020 at which time they are to be replaced by less generous tax credits. Reporting will still be needed in order to track who is eligible for a subsidy and then eventually who is eligible for a tax credit. We first uncovered these details in a recent blog: House Passes AHCA Bill – What This Means for Employer Compliance.

The Congressional Budget Office and the AHCA

On May 25^th, the CBO released its report on the amended AHCA bill that passed in the House. The report found that 23 million Americans could lose their health insurance by the year 2026. Before the Senate could even take a look at the bill, the CBO was required to report on it. Since there were actually budgetary savings implemented by the bill it is now free to move to the Senate, but from there it will not be an easy road.

Final Thoughts

The road ahead for healthcare repeal is a bumpy one at best. Congressional Republicans are faced with the daunting challenge of living up to their campaign promises of “Repealing and Replacing” the ACA while at the same time trying to preserve coverage rates and lower premiums. This is a challenge that may prove “undoable” and in the end lawmakers may have to compromise.

Summary:

• AHCA bill passed in the House of Representatives
• Senate will now take up the bill, and many have said publicly that it will have significant changes and potential poison pills added that would keep it from ever becoming law.
• Individual and Employer mandate penalties go to $0 as of 12/31/2015.
• ACA Reporting stays intact as is, with the addition of new additional reporting as of 1/1/2018.
• Definition of what plan can receive a subsidy or tax credit has changed.
• Subsidies will be replaced with tax subsidies in 2020.

On May 4, 2017 the US House passed the latest iteration of the American Healthcare Act (AHCA), a reconciliation bill aimed at repealing and replacing the ACA. The next step is for the bill to be sent to the Senate, where it is already facing harsh criticism.

The Senate is expected to take on an even slower pace as many members are saying that they need “plenty of time to look things over”. Thus far many Republican Senators have expressed concern over the substance of the new plan. Some noteworthy statements are as follows:

“We’re not under any deadline, so we are going to take our time” – Sen. John Cornyn (R-TX)

“I’m not so sure this is good civics here” – Sen. Lindsey Graham (R-SC)

“The Margin of error is a lot less over here” – Sen. John Thune (R-ND)

“Anything that makes it impossible for us to do under reconciliation we’ll have to either try to do it a different way or do it at a later time” – Sen. Roy Blunt (R-MO)

“It’s a skeleton, but it’d definitely still not the final product” – Sen James Lankford (R-OK)

Senators Lindsey Graham (R-SC), Shelley Moore-Capito (R-WV) and Johnny Isaakson (R-GA), are co-sponsoring an earlier bill that was authored by Sen. Susan Collins (R-ME) and Sen. Bill Cassidy (R-LA). This bill takes an entirely different approach than that of the house. It has language that allows states to either keep the current ACA law’s framework or opt into a new program that would enroll people into a catastrophic insurance plan that would be paid for through the use of tax credits.

The most important items that the House Freedom Caucus negotiated in order to pass the latest bill, such as the opting out of Essential Health Benefits, are possibly unallowable in Senate Reconciliation rules. This seems to be the case as all items must concern the budget and not regulation, something Dems are sure to bring up at large.

Senators Chuck Grassley (R-IA) and Roy Blunt (R-MO), think that the Senate might write its own bill from scratch and disregard the latest House bill. Additionally, unlike the house, the Senate must receive and review a score from the Congressional Budget Office (CBO) before a vote of any kind. It’s expected to take two weeks for this to occur.

At this point it is uncertain what the revised Senate bill will look like, but we do know that it will undergo an overhaul. New developments will surface on a daily basis which makes it difficult to determine exactly what this means for Employer Compliance and Reporting going forward. Assuming no changes occur to the bill (which we know they will) this is what we know so far………

• Sec 205, 206 – Individual Mandate and Employer Mandate Penalties for offering health coverage will go to $0.00 after Dec 31, 2015. This does not address any penalties that may be incurred for the 2015 plan year prior to Dec 31, and from all accounts the IRS is planning on implementing penalties for the 2015 plan year. More on that here.
• Sec 205, 206 – While taking the Mandate penalties to $0.00, the IRS reporting penalties associated with the filing of “Informational Returns” are assumed to stay the same. Changes to the reporting requirement for large employers are not mentioned in the bill and are also assumed to stay “as is”.
• Sec 131 – Repeal of Subsidies. The cost sharing subsidies created by the ACA are not to be repealed until December 31, 2019 to allow for transition. The government will need to know who is eligible for a subsidy for 2017, 2018 and 2019. That means employers will need to report coverage offered. After this, ongoing reporting will still be needed to track Tax Credits.
• Sec 202 – Additional Modification to Premium Tax Credits under ACA. This would go into effect after Dec, 31 2017 (which excludes this reporting year) and would no longer be allowable for insurance that covers abortions. These would additionally now be indexed based on “age” and “income” which would substantially decrease credits available for younger tax payers.
• Sec 202 – Change to the definition of “Qualified Health Plan”. Qualified health plans look to exclude both MV requirements as well as indexing.
• Sec 202 – Reporting Under Section 6055(b). New reporting for information relating to Off-Exchange Premium Credit Eligible Coverage. New requirements will be effective as of Jan 1, 2018 with regard to newer Premium Credits.

No-one yet knows when the senate will enact a new law or even what that law will look like. It may be late Summer to early Fall before we know anything. At that point changing the reporting requirement for the tax year 2017 will not be possible. So it is expected that 2017 reporting requirements will stay as they currently are. If the law passes in its current form, the mandate penalties will be eliminated, but that does not affect the penalties associated with failure to file informational returns. This affects the exchanges, the Insurance Carriers and Applicable Large Employers (ALEs).