On Monday, January 23rd, Senators Bill Cassidy (R-LA) and Susan Collins (R-ME) introduced the Patient Freedom Act of 2017 (“PFA”), the first of what may be many Republican Affordable Care Act (“ACA”) “replacement” alternatives. The PFA is notable for several reasons. It is the first replacement plan to be introduced in the 115th Congress, it is sponsored by Senators who are considered comparatively moderate on health issues, and thus its content may represent an opportunity for compromise in the future, and, perhaps most interestingly, does not actually repeal the ACA. The overarching feature of the PFA is that it allows states to control which course they chart for health reform.
The ACA: What Stays and What Goes
If enacted, the PFA would eliminate the majority of the provisions contained in Title I of the ACA. This includes the individual and employer mandates, the community rating provision, essential benefits requirements, and the establishment of the health benefit exchanges. However, the ACA provisions the PFA retains are just as notable as the provisions it removes. The PFA maintains the bans on lifetime and annual coverage limits, maintains the ACA ban on coverage exclusions based on preexisting conditions, continues to permit dependents to remain on their parents’ plan until age 26, keeps in place the ACA non-discrimination requirements, and maintains the ACA mental health parity coverage requirements. The PFA also does not repeal any provisions outside of Title I, leaving many features in place, such as Medicaid expansion and Medicare prescription drug plan provisions.
The PFA would shift the decision of how to implement health reform to individual states. The PFA allows states to choose between three options: 1) maintain the current ACA model using subsidies and health benefit exchanges to provide insurance coverage; 2) enact a market-based option or “state alternative;” or 3) select to design its own health system without federal funding. If a state fails to select one of the options by a certain date they will be deemed to have selected the market based option.
Option 1: Keep the ACA
States that elect to continue to operate under the ACA will be treated as if the changes to Title I of the Act in the PFA were never enacted. This will allow states to maintain health benefits exchanges and for eligible enrollees to receive federal subsidies and cost sharing reductions to purchase coverage from qualified health plans (“QHPs”). However, States may see a reduction in the exchange subsidies and costs sharing reductions available to enrollee as the PFA includes an additional provision designed to align federal funding between ACA states and states that elect the new market-based approach.
Option 2: Market-Based Approach
The market-based approach, or “State Alternative” option, will allow states to essentially shift residents enrolled in QHPs and potentially Medicaid into a standard high-deductible health plan containing basic pharmaceutical coverage and some coverage for preventive care and free immunizations. Residents currently enrolled in QHPs will receive Roth health savings accounts (“HSAs”) funded through tax credits. These tax credits will replace the advanced premium tax credits QHP-enrollees are currently eligible to receive with a tax credit that is similarly advanceable and refundable. The tax credit is also adjustable based on the age, income, and geographic location of the enrollee.
States may also include the Medicaid expansion population under this market-based alternative, but only enrollees not otherwise eligible for Medicare coverage, and eligibility for federal Roth HSA contributions will be limited to those not enrolled in a federal healthcare or veterans benefit program. States can either administer the market-based solution themselves or they can allow the federal government to administer the system. The total amount of the tax credits available under the market based approach will be equal to 95 percent of the total projected ACA premium tax credits and cost-sharing subsidies that the state would have otherwise received.
What’s Next and What to Watch?
The PFA is the first of what may be many Republican plans to replace the ACA. Reports indicate other members of Congress, including Senator Rand Paul, are expected to release alternative plans in the near future. It is unlikely that any one plan will be enacted in the form that it is introduced. However, significant insight into what ultimate changes may occur can be gained by monitoring how stakeholders- such as members of Congress, the administration, and governors- respond to the various provisions contained in these proposals. Health care entities should closely monitor the provisions that appear to have support among the various stakeholders to ensure that there is sufficient time to react and adapt to the changing health care environment.