Senate GOP Releases Draft Health Care Reform Bill

June 23, 2017

This week, Senate Republican leadership released its draft health care reform measure, which, like the House-passed measure, focuses primarily on Medicaid reforms and strengthening the individual market while also benefiting employers to some extent.  Significantly, the Better Care Reconciliation Act of 2017 does not cap the tax exclusion for employer-provided health benefits, though we expect a cap will be part of the debate over corporate tax reform later this year.  There is considerable speculation regarding whether the Senate will vote on the measure as planned prior to the July 4 recess.  Either way, the draft bill is likely to change as four Senators in the 52-member GOP caucus have announced their opposition and the Republicans can only lose two votes.  (If Majority Leader McConnell can cobble together 50 supporters, Vice President Pence would cast the tie-breaking vote.)  The provisions in the current draft that most directly impact employers include the following items that were also in the House bill:

  • Zeroes out the employer penalty for not offering affordable, minimum value coverage ; 
  • Maintains the ACA benefit mandates on employer-provided coverage (though the underlying mandate to offer coverage would remain and could be enforced by an ERISA lawsuit);
  • Delays the ACA's Cadillac Tax from 2020 to 2026; 
  • Repeals all of the other ACA taxes, except for the increase in the Medicare payroll tax on high-income earners, which is phased out in 2023;
  • Significantly increases the contribution limits on Health Savings Accounts and their flexibility; and
  • Does not change the ACA's benefit mandates on large employers.  For example, the requirements to provide dependent coverage until age 26, the prohibition on annual and lifetime limits, first-dollar coverage for preventive care, and the 90-day waiting period limitation all remain in place along with their penalties for noncompliance.
Meanwhile, the ACA issue about which state benchmark plan large multi-state self-insured employers are supposed to use for the annual and lifetime limits mandate remains.  The bill also would substantially increase state flexibility through an expanded waiver process, which could have unintended impacts on ERISA preemption and must be carefully watched.  The Senate bill would also provide $2 billion for state grants to address the opioid crisis, $50 billion over four years for a short-term stabilization fund for the states, and $62 billion over eight years for a long-term state innovation fund to reduce premium costs in the individual market.  Like the House-passed bill, the draft bill's historic changes to Medicaid, the significant reduction in the program's growth rate, and the ability for states to waive the ACA's benefit mandates are drawing the most media attention.  If the bill passes the Senate, the House will likely take up the measure before the August recess.