With the Clock Ticking on Health Care, the Senate Weighs Bipartisanship vs. a Repeal and Replace Revival

Time is running out for Congress to reform the nation’s health care system, and the Senate is considering two options that could impact state health care policies dramatically. The choices include a bipartisan bill to stabilize the Affordable Care Act’s (ACA) insurance markets and give states the information they need to set insurance rates for next year, and a repeal-and-replace bill that could cause states to lose billions in healthcare funding. NASHP examines the ramifications of the proposed bills that could radically rewrite health care policies next year.

Since reconvening early this month, the Senate has taken several steps toward health care reform, including holding a series of hearings. The pressure to act is intense as Congress faces many significant deadlines—including a Sept. 27 insurance rate decision deadline for most states and the Sept. 30 expiration of reconciliation authority, which allows for a bill’s passage by a simple majority and avoid a Democratic filibuster.

Deep divisions remain over what approach Congress will take in the next two weeks. While work is underway on a bipartisan, short-term stabilization strategy, significant attention is focused on a full repeal-and-replace bill proposed last week. The latter bill may represent the final opportunity for Republicans to repeal ACA using the current FY2017 budget reconciliation authority. Meanwhile, any bipartisan stabilization bill must be approved before the rate decision deadlines if it is to have any significant impact on insurance markets in 2018. Below, NASHP recaps the status of major pending health care legislation.

Senate HELP market stabilization bill
The Senate HELP Committee, led by Chairman Lamar Alexander (R-TN) and Ranking Member Patty Murray (D-WA), is projected to release a market stabilization bill this week, resulting from a series of hearings attended by governors, insurance commissioners, experts, and stakeholders. The efforts mark a bipartisan return to collectively composing a short-term bill to bring immediate stability to the individual insurance markets. Alexander has suggested the bill will seek to 1) temporarily fund cost-sharing reduction payments; 2) provide states with greater flexibility, likely through changes to 1332 waivers; and 3) extend access to “copper” (catastrophic) plans to more individuals.

During hearings, several senators and witnesses also proposed establishment of a federal reinsurance program to help bolster insurance markets. Despite near consensus that these strategies are essential to stabilizing the market, the bill faces steep hurdles, including reticence from Finance Committee Chairman Orrin Hatch (R-UT), whose committee shares jurisdiction over 1332 waiver provisions. Further details are available in the blog: Moving Toward Health Care Compromise: Bipartisan Hearings Take Center Stage.

Graham-Cassidy-Heller-Johnson Bill

This bill, sponsored by Sens. Lindsay Graham (R-SC), Bill Cassidy (R-LA), Dean Heller (R-NV), and Ron Johnson (R-WI), proposes to end ACA’s major insurance provisions and the associated federal funding that subsidizes it by replacing it with a block grant program that states can use to implement their own reforms. It also proposes significant restructuring of Medicaid, establishing a per capita cap model for Medicaid financing. To date, one analysis of the bill has assessed that it would lead to a major redistribution of federal money to states, but also cut nearly $239 billion in total funding to states.

The Congressional Budget Office (CBO) is expected to release a score of the bill by early next week, however, the analysis will be limited in scope to include only basic budgetary estimates, and will not evaluate practical implications of the bill such as estimated coverage losses or changes to premium prices. The Senate Finance Committee is scheduled to host a hearing on the bill this Monday, September 25. Major provisions of the bill’s insurance reform include:

Affordability programs:

  • Repeals advance premium tax credits and cost-sharing reduction payments as of Jan. 1, 2020.
  • Establishes the Market-Based Health Care Grant Program for states.
    • Appropriates $1.176 trillion from 2020 to 2026 for states to use to:
      • Establish or maintain a program to help high-risk individuals purchase health coverage;
      • Establish or maintain a premium stabilization program with insurers for the individual market;
      • Pay providers for health care services as specified by the Centers for Medicare & Medicaid (CMS) administrator;
      • Fund assistance to reduce out-of-pocket costs for individuals enrolled in the individual market;
      • Help individuals purchase coverage on the individual market when they do not have access to employer coverage;
      • Provide coverage for individuals eligible for Medicaid; and/or
      • Establish a managed care coverage program for individuals not eligible for CHIP or Medicaid.
    • Up to 20 percent of funds can be used to provide insurance to those eligible for Medicaid.
    • Creates a reserve fund of $10 billion in 2020 for states that experience an unexpected shortfall.
    • Funding would be allocated based on federal spending in the state on Medicaid expansion and affordability programs under the ACA. Through the duration of the program, funding allocations will be adjusted based on enrollment and risk. By 2026, it is anticipated the formula will ensure that every state received the same amount of funding on a per person basis. States may waive any provision restricting how an insurer varies premium rates in the individual or small group markets (except for gender-based or “protected class-based” ratings). This includes waiving essential health benefits, prohibitions of lifetime and annual limits, age rating bands and restrictions on medical underwriting.
    • Defines credible coverage as coverage that has an actuarial value equivalent to that of the lowest level Children’s Health Insurance Program (CHIP) plan allowed in a state.
  • Appropriates $10 billion in 2019 and $15 billion in 2020 to CMS to fund “arrangements with health insurance issuers” to assist in the purchase of health insurance benefits and respond to urgent health care needs within states.

Flexibility on health savings accounts (HSAs):

  • Repeals tax on HSAs retroactive to Jan. 1, 2017.
  • Enables payments from HSAs to go to services for children under the age of 27 as of Jan. 1, 2018.
  • Enables individuals to use HSAs to pay for premiums of high-deductible health plans as of Jan. 1, 2018.
  • Permits individuals to pay for primary care services from an HSA.
  • Establishes a tax-deduction for individuals that enroll in a high-deductible health plan and pay into an HSA.
  • Increases the maximum contribution limit allowed for HSAs and allows for spouses to make contributions to the same HSA as of Jan. 1, 2018.
  • Allows for retroactive payments from an HSA in circumstances where the HSA was established post-receipt of the services as of Jan. 1, 2018.

Other insurance provisions:

  • Effectively eliminates Individual and employer mandates by zeroing the tax penalty retroactive to Jan. 1, 2016.
  • Allows any individual to enroll in a catastrophic (“copper”) plan; includes catastrophic plan enrollees as part of individual and small-group market risk pools as of Jan. 1, 2019.19
  • Excludes plans that include coverage for abortion from qualifying as a QHP (except in the case of abortion necessary to save the life of the mother or pregnancy as the result of rape or incest) as of Jan. 1, 2018.


Medicaid expansion:

  • Repeals the ACA’s Medicaid expansion as of Dec. 31, 2019, and does not permit states to implement the expansion as of Sept. 1, 2017.
  • Enhanced match for states that expanded Medicaid prior to March 23, 2010, would be 90 percent in 2018 and 2019 and then reduced to 0 percent after 2019.

Medicaid financing:

  • Shifts to per capita cap model: Restructures federal Medicaid financing to a per capita cap model beginning in FY 2020; targeted spending amounts would increase annually by inflation factors that vary by enrollee categories (for more information, see Sec. 124 in this summary document).
  • Block grant option: State option in FY 2020 to receive block grant funding instead of per capita cap funding for non-elderly, non-disabled, non-expansion adults

Other Medicaid provisions

  • Work requirements: States could implement work requirements as a condition for receipt of Medicaid coverage for non-disabled, non-elderly, non-pregnant adults beginning October 1, 2017; states would receive a 5 percent federal administrative match increase.
  • Eligibility redeterminations: Allows states to conduct Medicaid eligibility redeterminations every six months or more frequently for ACA Medicaid expansion enrollees or enrollees with income above 133 percent federal poverty level (FPL); includes a temporary 5 percent federal administrative match increase as of October 1, 2017-December 31, 2019.
  • HCBS Demonstration Project: Establishes a four-year home- and community-based services demonstration project (FY 2020-FY 2023) that will give priority to the 15 least-populous states; aggregate amount provided to eligible states for all years of the demonstration cannot exceed $8 billion.
  • Performance Bonus Payments: Establishes quality performance bonus payments in Medicaid and CHIP for FY 2023-FY 2026.
  • Retroactive coverage limits: Places limits on the effective date for retroactive coverage of Medicaid benefits, with some exceptions; effective Oct. 10, 2017
  • Provider tax threshold reduction: Beginning in FY2 021, reduces Medicaid provider tax threshold from current level of 6 percent to 4 percent by FY 2025
  • Coverage of Certain Inpatient Psychiatric Services: States have the option of providing Medicaid coverage of qualified inpatient psychiatric hospital services to individuals over the age of 21 and under the age of 65
  • Enhanced FMAP for AI/AN population: Provides 100 percent FMAP rate for Medicaid services for an individual who is a member of an Indian tribe or an Alaskan Native and is eligible under a Medicaid state plan
  • Non-Application of Disproportionate Share Hospital (DSH) cuts for certain states: For any year after 2020, if a state’s allotment under the Market-Based Health Care Grant Program is less than its 2020 base amount grown by CPI-M to the comparison year in the block grant, the state would be exempt from the ACA’s DSH cuts and could continue to receive DSH funding


  • Repeals the tax on over-the-counter medications as of Jan. 1, 2017
  • Repeals the medical device tax as of Jan. 1, 2018

Delivery system, prevention, and public health

  • Repeals ACA’s Prevention and Public Health Fund
  • Provides $422 million for FY 2017 to the Community Health Center Fund.

Sanders “Medicare for All” Bill
Sen. Bernie Sanders’ (I-VT) Medicare for All bill proposes to establish a single-payer health system that would be phased in by a gradual reduction of the eligibility age for Medicare. The bill proposes to significantly expand benefits required by coverage offerings and reduce consumer cost sharing requirements. While there is no score expected from CBO, Sanders’ webpage indicates the plan is estimated to cost $1.38 trillion annually. While financing for the bill is somewhat unclear, Sanders has proposed funding could come through increased taxes and elimination of certain tax deductions. The bill has 16 Democratic cosponsors, but is not expected to be taken up by the current Congress.

Other Emerging Proposals: Public Program Buy-Ins
Although no legislative language has been put forth yet, other senators have proposed ideas to allow individuals to buy-in to public coverage programs. Sen. Brian Schatz (D-HI) is working on a bill that would provide states with the option of opening up their Medicaid programs to uninsured individuals of any income level who are interested in purchasing coverage. Also, Sen. Chris Murphy (D-CT) is reportedly developing legislation for a Medicare buy-in option for all individuals regardless of age.