What to Expect Now that Senate Republicans have Released their Better Care Reconciliation Act

On June 22nd, Senate Republican leadership published a discussion draft of their healthcare reform legislation – the Better Care Reconciliation Act of 2017. As expected, this bill differs from the House-passed version – with those differences centered on the Senate’s treatment of Medicaid expansion and tax credits. Provisions directly impacting CDH accounts are largely unchanged.

CDH provisions:

  • Section 108: Repeal of the tax on employee health insurance premiums and health plan benefits: The effective date of the “Cadillac” Tax is delayed from 2020 to 2026. Due to the budget reconciliation rules that prevent a provision from being passed that worsens the fiscal position of the federal budget over 10 years, a full repeal is not possible.
  • Section 109: Repeal of the tax on over-the-counter medications: Repeals the prescription requirement for OTC medications for all account types and is effective after 12/31/16.
  • Section 110: Repeal of the tax on health savings accounts (HSAs): Effective after 12/31/16, repeals 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%.
  • Section 111: Repeal of limitations on contributions to flexible spending accounts (FSAs): Repeals the annual $2,500 FSA contribution limit and is effective after 12/31/17.
  • Section 121: Maximum contribution limit to HSAs increases to the amount of deductible and out-of-pocket limitations: Effective 12/31/17, increases the annual HSA contribution limit to the out-of-pocket max set by the IRS for HSA-qualified plans ($6,650 for singles and $13,300 for families in 2018).
  • Section 122: Allows both spouses to make catch-up contributions: Eases the administrative burden, allows spouses to make catch-up contributions to the same HSA, and is effective after 12/31/17.
  • Section 123: Special rule for certain medical expenses incurred before the establishment of the HSA: Allows medical expenses incurred within 60 days prior to establishing an HSA to be considered eligible HSA expenses and is effective after 12/31/17.

Does the Better Care Reconciliation Act have the votes to pass?

In short, no. At least not yet and not in public. Here’s a breakdown by the numbers: Senate Majority Leader Mitch McConnell needs 51 votes to pass the bill under budget reconciliation. No Democrats are expected to vote for the bill. He has 52 Republican Senators, plus the guaranteed tie-breaking vote of Vice President Pence, so he can afford to lose two Republican votes.

Within a day of being released, five Senators announced they’re opposed to the Better Care Reconciliation Act, as currently written. In addition, several moderate Republicans remain uncommitted. McConnell will need to convince a majority of the reticent Senators to support the bill if it has any chance of passage.

Timing of future votes

Let’s say Senate leadership is able to secure the votes needed by simultaneously appeasing the concerns of the conservatives and moderates. Now they need to have the bill “scored” (an estimate of the bill’s revenue and budgetary impact and insurance coverage changes) because, unlike the House, the Senate cannot pass the bill without a score and that is not always a speedy process.

The CBO/JCT were reportedly provided the bill’s language prior to its official release June 22nd, so they have been able to work on scoring the bill in order to meet the July 4th deadline. But, the score they release needs to 1) be satisfactory to Senate staffers and Senators – and that can often require several rounds of modification to the bill’s provisions, making tweaks to the language until the score is satisfactory – and 2) the Senate feels comfortable with the bill’s estimated budgetary and coverage numbers. Under the original timeframe all of this needed to be done in a week.

McConnell had to delay the vote until after the July 4th recess because he simply does not have the votes needed for passage and needs time to negotiate with both conservative and moderate Senators.

To complicate matters further, any tweaks made to the bill to secure the conservative and moderate votes and to create a satisfactory score also need to pass a review by the Senate Parliamentarian. Anything that does not pass, will be stripped from the legislative language prior to the Senate vote.

This delay means the House will have less time in the month of July to decide if it will accept the Senate’s bill as-is and hold a House vote on the bill, or if it will reject the Senate’s bill and negotiate a “conference” bill that can be passed in both chambers. If this can completed by the end of July, Congress can return after the August recess to focus on tax reform legislation.

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