An Update on the Three Prongs of Health Reform

twitterCongressional action to repeal and replace the Affordable Care Act (ACA) is on the fast track. The administration and GOP leaders have outlined a three-pronged effort to reform healthcare beginning with passage of the American Health Care Act (AHCA). Last night, Congress released Manager’s Amendments to the AHCA, inclusive of a series of policy and technical changes to the bill. Here are full statutory text of policy and technical amendments.

Notable changes:

  • Provides state option to convert Medicaid to a block grant, instead of the per capita cap for non-elderly, non-disabled eligibility groups.
  • Provides state option to add a work requirement for Medicaid with 5 percent enhanced administrative federal match to support state’s administration of the requirement
  • Grandfathers enhanced matching rate for childless adults who are enrolled as part of Medicaid expansion where states opted to expand Medicaid as of March 2017. Enrollees must maintain continuous enrollment in Medicaid to retain enhanced match.
  • Retains state option to cover ACA childless, non-disabled, non-elderly, non-pregnant adults up to 133 percent of the federal poverty level (FPL). States receive a regular (not enhanced) match for new enrollees in this category. As of 2018, states no longer have the option to cover these adults above 133 percent FPL.
  • Increases the per capita cap growth rate for elderly and disabled eligibility categories from CPI-M-U to CPI-M-U+1.
  • Speeds up repeal of ACA taxes, effective in 2017 instead of 2018.
  • Reduces the tax deduction threshold for medical expenses.
  • Amendment targeted to New York that, as of 2020, prohibits federal match for most county-provided state matching funds. Funds from counties over a certain size that meet other requirements will continue to be permitted.

The House is expected to vote on the AHCA on Thursday, March 23; a revised Congressional Budget Office (CBO) score is expected to be released prior to this vote. Here is a quick snapshot of how the AHCA’s proposed changes compare with the ACA:

Overall approach:Multi-part strategy to increase coverage via

  • Medicaid expansion,
  • Provision of income-based premium assistance, and
  • Individual and employer mandates


20 million gained coverage; lowest rate of uninsured

Overall approach:Part 1 of 3 pronged approach to reform health care. Includes:

  • Medicaid expansion repeal; refinancing
  • Provision of age-based premium assistance
  • Continuous coverage requirement


14-24 million lose coverage from

2018-2026 (CBO based on bill as of March 13, 2017)


  • Advanceable premium tax credits adjusted based on income and cost of silver plan premiums.
    • Amount set based on a sliding scale
    • Available to people without other sources of coverage from 100-400 percent FPL
    • No cap on credits
  • Cost-sharing subsidies to individuals with income between 100-250 percent FPL that purchase silver plans.
  • Tax credits and subsidies only available for qualified health plans purchased through the health insurance exchanges.

  • Advanceable premium tax credits adjusted based on age.
    • Credits begin at $2000 for those under 30, up to $4000 for those over 60.
    • Available to people without other sources of coverage; phases down with income over $75,000
    • Credits are capped at $14,000 per family per year.
  • No cost-sharing subsidies.
  • Tax credits may be used to purchase plans on or off exchanges; loosens definition of qualified health plan to include catastrophic plans.
Plan value:

  • Standardized required benefit categories.
  • Defines minimum actuarial values for qualifying health plans.
  • No cost sharing for preventive services; limits on out-of-pocket, annual, and lifetime spending.
  • 3-to-1 age rating factor.
Plan value:

  • Maintains standard benefit categories.
  • Eliminates actuarial value requirements, effectively enabling catastrophic and high-deductible plans. Greater flexibility over the use of health savings accounts
  • Maintains cost-sharing and spending limit protections.
  • 5-to-1 allowable age rating factor
  • Establishes stability fund, which provides allotments to states to fund supplemental insurance market stabilization programs.
Investment in Prevention and Public Health ($14.5 billion over 10 years) Repeals Prevention and Public Health Fund
New taxes on insurers, device manufacturers, drug manufacturers, and tanning industry Repeals taxes
Medicaid Expanded adult coverage to 138 percent FPL, 100 percent/90 percent federal match

  • Extends eligibility to expansion population including childless adults
  • Open-ended federal funding

  • Phase out enhanced match for adult expansion
    • Grandfather current enrollees at enhanced match rate
  • Converts financing to per capita cap; state option to adopt block grant for child and adult eligibility groups
  • State option to add a work requirement
Deficit reductionCBO estimate: $124 billion (10 years) Deficit reductionCBO estimate: $388 billion (10 years) (Based on bill as of March 13, 2017; CBO update pending)

The second prong of reform entails actions taken by the administration to facilitate regulatory changes and flexibility. This was launched in February when Secretary Price issued guidance regarding marketplace plans. Additional guidance through HHS letters to governors encouraged them to take advantage of waiver opportunities under Sec. 1332 of the ACA and signaled greater flexibility in Medicaid reform via waiver authority.

Phase three of the reform effort involves passage of additional legislation aimed at the health care market. While passage of any such legislation may be challenging—many would likely require 60 votes in the Senate to avoid filibuster—such bills may, together, lead to significant changes to health care. Three such bills are currently working their way through the House and could significantly alter state regulatory authority over certain insurance products.

  • HR 1304 Stop-Loss: This bill would exclude stop-loss coverage for self-insured group health plans from the federal definition of health insurance coverage. This change would result in a preemption of state regulation of this type of coverage. Currently, while states cannot regulate self-funded plans, they do have authority to regulate health plan stop-loss coverage, an essential support for many self-funded plans. States maintain the ability to regulate stop-loss as insurance generally.
  • HR 1101 Association Health Plans: This bill authorizes the creation of association health plans (AHPs) and would preempt state laws that prevent an issuer from offering an AHP. In the 1990’s states experimented with state purchasing alliances for small businesses. By 1998, 28 states had enacted laws to establish purchasing alliances either statewide or regionally. Independent analyses showed that they met with limited success and, while they increased choice, they were not able to achieve sustained premium savings. In addition, enrollment in such policies was generally low, representing a fraction of the small group market.
  • HR 1313 Employee Wellness: This bill effectively eliminates the requirement that employers comply with protections outlined in the Americans with Disabilities Act (ADA) and Genetic Information Nondiscrimination Act (GINA) in relation to employee participation in workplace wellness programs. Current law allows employers to penalize employees for non-participation in wellness programs but only if those programs meet conditions to prevent discrimination. The ADA limits the employers’ ability to mandate employees to provide health information; GINA protects employees and their families by allowing them to not disclose genetic information about his or herself or his or her families.

NASHP continues to track developments in Congress and their impact on states. We will report further on changes to the AHCA, its fate in the House, and update the status of bills under consideration.

Support for this work was provided by the Robert Wood Johnson Foundation. The views expressed here do not necessarily reflect the views of the Foundation.