What’s Inside the American Health Care Act?

The bill, called the American Health Care Act (AHCA), kept some protections from Obamacare such as allowing young adults to stay on their parents’ plan until the age of 26 and pre-existing conditions cannot disqualify someone from obtaining insurance.

Below is a bulleted summary of the legislation based on the two authoring House Committees’ section-by-section synopses:  

• The Prevention and Public Health Fund - the Patient Protection and Affordable Care Act (ACA) established the Prevention and Public Health Fund (PPHF) as an advanced appropriation for prevention, wellness, and public health initiatives.  Repeals PPHF appropriations for fiscal year 2019 onwards.
• Community Health Center Program - Provides increased funding for the Community Health Center Fund, which awards grants to Federally Qualified Health Centers (FQHCs). FQHCs are community-based outpatient facilities that provide health services to medically underserved populations.
• Federal Payments to States - Imposes a one-year freeze on mandatory funding to a class of providers designated as prohibited entities which include those that are community providers primarily engaged in family planning and reproductive health services. This funding includes Medicaid, the Children’s Health Insurance Program, Maternal and Child Health Services Block Grants, and Social Services Block Grants.
• Repeal of Medicaid Provisions
  • Repeals States expanded authority to make presumptive eligibility determination. States would still be allowed to make presumptive eligibility determinations for children, pregnant women, and breast cancer and cervical cancer patients.
  • Reverts the mandatory Medicaid income eligibility level for poverty-related children back to 100% of federal poverty level. States could cover this population in their State Children’s Health Insurance Program (CHIP).
  • Repeals the 6% point bonus in the federal match rate for community-based attendant services and supports, and would return to prior law without the 6% bonus.
• Repeal of Medicaid Expansion
  • Codifies NFIB v. Sebelius and makes Medicaid expansion optional for States
  • Repeals the State option to extend coverage to adults above 133% of federal poverty by December 31, 2019.
  • Repeals the enhanced match rate for newly eligible beneficiaries on December 31, 2019. (Click here for expanded summary with additional details on this change.)
  • Repeals the requirement that State Medicaid plans must provide the same “essential health benefits” that are required by plans on the exchanges, returning flexibility to the States on December 31, 2019.
• Elimination of DSH Cuts - Repeals the Medicaid Disproportionate Share Hospital (DSH) cuts for non-expansion States in 2018. States that expanded Medicaid would have their DSH cuts repealed in 2020.
• Reducing State Medicaid Costs
  • Would eliminate the State requirement to consider monetary winnings from lotteries (and other lump sum payments) for purposes of determining Medicaid and CHIP eligibility. It would count lottery winnings above $80,000 over multiple months.
  • Would limit the effective date for retroactive coverage of Medicaid benefits.
  • Would close the loophole in current practice by requiring individuals to provide documentation of citizenship or lawful presence before obtaining Medicaid coverage.
  • Would repeal the authority for States to elect to substitute a higher home equity limit that is above the statutory minimum in law.
• Safety Net Funding for Non-Expansion States - Provides $10 billion over five years to non-expansion States for safety net funding. (Click here for expanded summary with additional details on this change.)
• Providing Incentives for Increased Frequency of Eligibility Redeterminations - Requires States with Medicaid expansion populations to re-determine expansion enrollees’ eligibility every 6 months.
• Per Capita Allotment for Medical Assistance - Reforms federal Medicaid financing by creating a per capita cap model (i.e., per enrollee limits on federal payments to States) starting in FY2020. Would also modernize Medicaid’s data and reporting systems. Certain payments and populations would be exempt from caps.
• Repeal of Cost-Sharing Subsidy – Repeals the cost-sharing subsidy in 2020 established by the ACA.
• Patient and State Stability Fund – Establishes the Patient and State Stability Fund, which is designed to lower patient costs and stabilize State markets. the State and increasing health insurance options available through such
• Continuous Health Insurance Coverage Incentive - Beginning in open enrollment for benefit year 2019, if the applicant went longer than 63 days without continuous health insurance coverage in the previous 12 months, issuers will assess a flat 30% late-enrollment surcharge on top of their base premium. This late-enrollment surcharge would be the same for all market entrants, regardless of health status, and discontinued after 12 months, incentivizing enrollees to remain covered.
• Increasing Coverage Options – Repeals requirement to label insurance plans with actuarial value tiers.
• Change in Permissible Age Variation in Health Insurance Premium Rates - Loosens the ratio to five-to-one for the cost limit for the most generous plan for older Americans in comparison to the least generous plan for younger Americans, and gives States the flexibility to set their own ratio. ACA’s ratio limit was three times.
• Recapture Excess Advance Payments of Premium Tax Credits - The amount a household is required to pay towards their premiums is based on income. If a household’s income increases during the tax year, excess premium tax credits may result. For tax years 2018 and 2019, requires any individual who was overpaid in premium tax credits to repay the entire excess amount, regardless of income.
• Additional Modifications to Premium Tax Credit –
  • Makes available premium tax credits for the purchase of “catastrophic-only” qualified health plans and certain qualified plans not offered through an Exchange.
  • Prohibits premium tax credits from being used to purchase plans that offer elective abortion coverage.
  • Revises the schedule under which an individual’s or family’s share of premiums is determined by adjusting for household income and the age of the individual or family members.   
• Small Business Tax Credit - Repeals ACA’s small business tax credit beginning in 2020.
• Individual Mandate – Eliminates the penalty for failure to maintain minimum essential coverage. The effective date would apply for months beginning after December 31, 2015, providing retroactive relief to those impacted by the penalty in 2016.
• Employer Mandate - Eliminates the penalty to employers for failure to provide minimum essential coverage, repealing the employer mandate. The effective date would apply for months beginning after December 31, 2015, providing retroactive relief to those impacted by the penalty in 2016.
• Repeal of the Tax on Employee Health Insurance Premiums and Health Plan Benefits – Delays the imposition of a 40% tax on high cost employer-sponsored health coverage until taxable periods beginning after December 31, 2024.
• Repeal of the Tax on Over-the-Counter Medications – Allows inclusion of over-the-counter medications as qualified medical expenses and therefore payable via health savings accounts effective tax year 2018.
• Repeal of the Increase of Tax on Health Savings Accounts - Lowers the tax rate of HSA distributions that are not used for qualified medical expenses to pre-ACA percentages, effective for distributions after December 31, 2017.
• Repeal of Limitations on Contributions to Flexible Savings Accounts - Repeals the current maximum contribution limitation to an FSA ($2,500), effective beginning after December 31, 2017.
• Repeal of Medical Device Tax – Repeals the current 2.3% excise tax on the sale of certain medical devices created by the ACA, beginning after December 31, 2017.
• Repeal of Elimination of Deduction for Expenses Allocable to Medicare Part D Subsidy - Re-instates the business-expense deduction for retiree prescription drug costs without reduction by the amount of any federal subsidy. This section applies to taxable years beginning after December 31, 2017.
• Repeal of Increase in Income Threshold for Medical Expense Deduction – Restores the pre-ACA adjusted gross income percentage threshold to 7.5% for all taxpayers beginning in 2018 and extends the special rule for those aged 65 or older through this year.
• Repeal of Medicare Tax Increase – Repeals the ACA-imposed additional .9% Medicare Hospital Insurance surtax beginning in 2018.
• Refundable Tax Credit for Health Insurance - Creates an advanceable, refundable tax credit for the purchase of state-approved, major medical health insurance and unsubsidized COBRA coverage. To be eligible, generally, an individual must not have access to government health insurance programs or an offer from any employer; and be a citizen, national or qualified alien of the United States, and not incarcerated. The credits are adjusted by age:
  • Under age 30: $2,000
  • Between 30 and 39: $2,500
  • Between 40 and 49: $3,000
  • Between 50 and 59: $3,500
  • Over age 60: $4,000

The credits are additive for a family and capped at $14,000. The Secretary of the Treasury is empowered to create a system— building upon already developed systems— to deliver the credit.

• Maximum Contribution Limit to Health Savings Account Increased to Amount of Deductible and Out-of-Pocket Limitation - Increases the basic limit on aggregate Health Savings Account contributions for a year to equal the maximum on the sum of the annual deductible and out-of-pocket expenses permitted under a high deductible health plan. Thus, the basic limit will be at least $6,550 in the case of self-only coverage and $13,100 in the case of family coverage beginning in 2018.
• Allow Both Spouses to Make Catch-Up Contributions - Allows both spouses to make catch-up contributions to one HSA beginning in 2018.
• Special Rule for Certain Medical Expenses Incurred Before Establishment of HSA – Sets forth certain circumstances under which HSA withdrawals can be used to pay qualified medical expenses incurred before the HSA was established.
• Repeal the Tanning Tax – Repeals the 10% tax ACA imposed on indoor tanning services starting in 2018.
• Repeal of Net Investment Tax – Repeals the 3.8% tax applied to certain net investment income of individuals, estates, and trusts with income above certain amounts.
• Remuneration from Certain Insurers - Repeals the limit on the deduction of a covered health insurance provider for compensation attributable to services performed by an applicable individual starting in 2018.
• Repeal of Tax on Prescription Medications – Repeals the tax on brand pharmaceutical manufacturers beginning after December 31, 2017.
• Repeal of Health Insurance Tax – Repeals the annual fee imposed on certain health insurers beginning after December 31, 2017.

The bill was released without a Congressional Budget Office evaluation and faces a contentious battle in Congress. Republicans are still divided on their support of the legislation and Democrats vow to fight its passage.  President Trump supports the proposal.