This week, Senate Republicans weren't able to muster the votes needed to pass any of their three main healthcare reform efforts under budget reconciliation. While healthcare reform isn’t dead, the reconciliation process is. Republicans must now decide how to proceed. So, where do we go from here? Let's first look at how we got here, all in the last week.
How did we get here?
After a whirlwind week of votes on the Senate floor, kicked off by Vice President Pence casting the tie-breaking vote to begin the debate on the Affordable Care Act (ACA) repeal/replace efforts, the GOP’s attempts to pass healthcare reform with only 51 votes in the Senate died when Sen. John McCain (R-AZ) joined moderate Sens. Lisa Murkowski (R-AK) and Susan Collins (R-ME) to vote against the “skinny” repeal bill. This was the third, and final, piece of legislation offered by Senate Republicans that failed to garner the needed 51 votes to pass under budget reconciliation.
If any of these efforts had passed the Senate, the House would have voted on the Senate-passed bill. If the House did not pass that, the two chambers would form a conference committee to negotiate the final bill to be voted on by Congress and then sent to President Trump for his signature.
A recap of this week's votes:
- The first vote was on the Senate’s ACA repeal/replace bill (Better Care Reconciliation Act) and received only 43 votes. This was similar to the House-passed AHCA and included the CDH provisions listed below. Both moderates and conservatives rejected this repeal/replace bill.
- The second was a “clean” ACA repeal bill (Obamacare Repeal Reconciliation Act of 2017) that received 45 votes. It was modeled off of the 2015 bill Congress passed and was vetoed by President Obama. CDH provisions included a repeal of the Cadillac tax, repeal of the increased HSA penalty, repeal of the FSA contribution limit, and repeal of the over-the-counter drug restrictions.
- The last was the “skinny” repeal bill (Health Care Freedom Act) which received 49 votes and was opposed by Sen. John McCain on the grounds that he believes the Senate needs to return to “normal order” and pass ACA repeal/replace after holding committee meetings and garnering Democratic support. He also expressed concern that the House would opt to simply pass the skinny bill without going to conference with the Senate to negotiate a more substantial repeal/replace bill for the President to sign. The skinny bill included provisions to repeal the individual mandate, delay the employer and medical devise tax, and a three year increase of HSA contributions to the out-of-pocket maximum. A repeal of the Cadillac tax was also included as an amendment that was offered by Sen. Heller (R-NV) and was the only amendment to pass, with 52 votes. But the final skinny bill was not able to attract the same level of support.
Where do we go from here?
Immediately following defeat of the skinny repeal bill, Senate Majority Leader Mitch McConnell stated that it was time to move on, but that doesn't mean Republicans are ready to walk away from their promise to repeal the ACA. The path forward remains uncertain, but various options are available for the CDH industry to succeed in passing common sense reforms for account-based care, such as:
- Administrative/regulatory actions. The Trump administration and IRS could take action to not enforce the employer and/or individual mandate, and Health and Human Services (HHS) may address insurance market reforms to provide more flexibility to states. Administrative action is not expected to include CDH provisions.
- Include CDH provisions in “must pass” September legislation. The Children’s Health Insurance Program (CHIP) reauthorization bill must pass by September 30th, and legislation to raise the debt limit is also expected to be taken up for a vote in September. These bills could become contentious as the House attempts to push the Senate to pass ACA repeal/replace provisions or face the collapse of these crucial bills.
- Another Republican attempt in the Senate with the Graham/Cassidy/Heller proposal. Likely to be taken up in September, but this bill could only be passed under Budget Reconciliation (51 votes to pass) if the CBO is able to score the bill prior to the vote. It currently includes most of the CDH provisions listed below, except it does not delay or repeal the Cadillac Tax and does not repeal the annual FSA contribution cap.
- Include ACA repeal/replace with tax reform in the 2017 budget reconciliation instructions for the 2018 budget. This would enable ACA repeal/replace to continue under the budget reconciliation process, needing only 51 votes to pass, and could help Republicans say they “repealed” the ACA before the end of the year.
- Bipartisan ACA “repair” bill that will need 60 votes in the Senate to pass, but will also need to appeal to House conservatives. To date, this has been a tricky balancing act that House conservatives and Senate moderates could not establish; therefore, succeeding with Democratic support will be even more difficult. But House and Senate Democratic leadership have offered their willingness to work on ACA repair legislation and several Senate Republicans, including Sens. Lindsay Graham (R-SC), John McCain (R-AZ), Bill Cassidy (R-LA) and Susan Collins (R-ME), have either introduced bipartisan legislation or have voiced support for working with their Democratic colleagues. In a favorable sign for the CDH industry, a group of 10 moderate House Democrats has expressed interest in a bi-partisan ACA "fix" bill that could include the use of HSAs to help people with out-of-pocket expenses and the Problem Solvers Caucus is working on a bipartisan bill.
CDH provisions are down but not out
The following provisions still have the opportunity to be included in any future healthcare reform efforts:
- Repeal/modification/delay of the tax on employee health insurance premiums and health plan benefits – either in a full repeal of the Cadillac Tax, changing the calculation to exclude HSA and FSA employee contributions, or a future delay of implementation beyond the current date of 2020. Because the bill no longer has to pass under budget reconciliation, a full repeal, not just delay, is possible.
- Maximum contribution limit to HSAs increased to match the out-of-pocket maximum – set by the IRS for HSA-qualified plans ($6,650 for singles and $13,300 for families in 2018).
- Repeal of the tax on over-the-counter medications. Repeal the prescription requirement for OTC medications for all account types.
- Repeal of the tax on health savings accounts (HSAs). Repeal the increased penalty/tax on non-qualified HSA purchases back to the pre-Affordable Care Act amount of 10%, from the current 20%. For Archer MSAs, that tax is reduced to 15% from the current 20%.
- Repeal of limitations on contributions to flexible spending accounts (FSAs). Repeal the annual $2,500 FSA contribution limit.
- Allow both spouses to make catch-up contributions. Ease the administrative burden and allow spouses to make catch-up contributions to the same HSA.
- Special rule for certain medical expenses incurred before the establishment of the HSA. Allow medical expenses incurred within 60 days prior to establishing an HSA to be considered eligible HSA expenses.
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