The American Health Care Act of 2017 (H.R. 1628), known by the acronym “AHCA,” was introduced to the U.S. House of Representatives at the end of March 2017 by its sponsor, Representative Diane Black (R-TN), and passed the House on May 4, 2017.[1] The AHCA amends portions of the Patient Protection and Affordable Care Act, known more widely as the “ACA” or “Obamacare,” and is endorsed by President Donald Trump and Speaker of the U.S. House of Representatives Paul Ryan.

As presented, the AHCA is a budget reconciliation bill, meaning it will not be subject to filibuster in the Senate due to a debate limit of 20 hours.[2] The bill is the first phase of a three-phase process with the goal of repealing and replacing the ACA. Phases two and three will include administrative actions and additional legislative policies and bills as outlined by the Department of Health and Human Services (“HHS”).[3] In its current form, the AHCA poses to bring major changes and overhauls to the ACA.

The AHCA differs in several ways from the ACA. The first significant change under the AHCA is the removal of the requirement that every person[4] or employer[5] be required to purchase or provide health insurance or face a penalty payment. Although there is no insurance mandate, the AHCA will impose a ‘late’ penalty for individuals that do not purchase insurance, experience a lapse in coverage greater than 63 days, and then decide to purchase at a later date.[6] The “continuous coverage” penalty comes in the form of a 30% surcharge that individuals will be required to pay for one year in addition to their premiums.[7] When it comes to health savings accounts (“HSAs”), the AHCA increases the tax-free contribution limits to $6,550 for individuals and $13,100 for families, while allowing for spouses of a married couple to make catch-up contributions to the same HSA account.[8]

A second, and one of the more controversial changes the AHCA brings to the ACA surrounds the one-year restriction on federal funding to a state for payments to an entity that meets all of the following criteria:

          · is a 501(c)(3) tax-exempt organization;

          · primarily provides family planning services and reproductive health;

        · provides for abortions, excluding abortions in cases of rape or incest or where the woman’s life is in danger; and

          · previously received more than $350 million under Medicaid in 2014.[9]

The AHCA summary, provided by the Library of Congress’s Congressional Research Service (CRS), specifically lists Planned Parenthood Federation of America as an example of one such organization that will not receive funding under the new bill.

A third change to the ACA under the AHCA is that states will be allowed to opt out of certain consumer protections written into the ACA requiring that insurance companies provide coverage in specific situations. Pre-existing conditions are included as one of these specific situations, and, under the AHCA, states will be allowed to opt-out of mandatory coverage.[10] However, preexisting condition coverage will remain protected for individuals that maintain continuous coverage.[11] The ACA specifically set aside 10 services that every health plan is required to cover.[12] Among the services included are mental health and substance use disorders, prescription drugs, and pregnancy, maternity, and newborn care. Under the AHCA, individual states would be in charge of establishing their own standards for exempting insurers from the essential health benefits by applying for a waiver.[13] When it comes to the ability to charge higher premiums based on age, the ACA imposes a limit that prevents older individuals from being charged no more than three times as much as younger individuals. Under the AHCA, this limit is being increased to not more than five times the amount younger individuals are being charged, but may be preempted by application for a waiver on an individual state-by-state basis.[14]

One of the more interesting changes the AHCA brings about is the complete removal of a 10% excise tax placed on the price of indoor tanning services. In support of the removal of the tax, Representative Jason Smith (R-MO) took the time during a recent meeting on the floor to point out the tax predominantly served as a tax on woman after conducting a quick Google search that showed roughly 80% of the individuals that use tanning services were women.[15]The ACA provides opportunities for individuals to take advantage of tax credits for out-of-pocket expenses. Additionally, the ACA placed annual limits on costs associated with healthcare delivery, such as coinsurance, copays, and related costs. Under the new bill, individuals may utilize a tax credit based on their age, rather the ACA’s previous tax incentive system based on income, provided they make less than $75,000 annually.[16] Taxpayers under the age of 30 may qualify for a credit of up to $2,000, while individuals over the age of 60 may qualify for a credit of up to $4,000. For taxpayers that make over $75,000 in a year, the tax credit they are eligible for based on their age will be reduced by 10% of any income generated over $75,000, without resulting in a deduction below zero. After 2020, the tax credits and annual income threshold will be adjusted for inflation based upon a formula set forth in the AHCA. Additionally, the “Cadillac tax” imposed on employer plans with a higher, more expensive cost will be pushed back from an effective date of January 1, 2020, under the ACA, to January 1, 2026, under the AHCA.[17]

The AHCA includes multiple sections providing an “enhancement” to the ACA Medicaid programs.[18] Starting in 2020, the AHCA limits federal funds granted to states for Medicaid programs, specifically the Federal Medical Assistance Percentages (“FMAP”) unless the enrollees were enrolled prior to 2020 and do not subsequently have a break in eligibility lasting longer than one month.[19] The limitations are capped based on a formula that examines an individual state’s 2016 medical assistance expenditures in a variety of enrollee categories, with a reduction in federal funding the following fiscal year in the event a spending cap is exceeded by the state. Additionally, the bill removes the options for a state to extend Medicaid coverage to non-elderly adults with incomes above 133% of the poverty line, while also lowering the minimum family-income threshold that states may use to determine Medicaid eligibility from 133% to 100% of the poverty line for children between the ages of six and 19. The bill also removes, starting in 2020, the requirement that an alternative benefit plan offered by a state provide the above-mentioned essential health benefits. Lastly, the updated Medicaid provisions under the AHCA allow for a state to impose work requirements on recipients as a condition of eligibility with some restrictions for, among others, pregnant women.

Some aspects of the ACA are remaining in effect without much change, or any change at all. Young adults will continue to be allowed to take advantage of a parent’s health insurance plan until they reach the age of 26. Although there is debate over the way the language is written in its current form,[20] the AHCA will continue to prevent insurers from setting a limit on how much they must pay to cover an individual. For example, prior to the ACA an insurance company could institute a $1 million maximum coverage limitation for the lifetime of an individual. Under the ACA and the intent of the AHCA, these lifetime limitation bans would stay in place.

Now that it is approved by the House, the AHCA will continue to the United States Senate for approval and, following final approval by the President, become law if passed. However, there are already talks of a major overhaul and sweeping changes that will take place before the bill will be approved by the Senate. The bill only passed the House by a small margin, with a final tally of 217 in favor and 213 against. The Senate has not yet set a timeline for obtaining a vote, but, as Senator Lamar Alexander from Tennessee alludes, it does stand to change significantly. “The Senate will carefully review the House bill, and now we’ll go to work on a Senate bill,” Alexander said on the Senate floor shortly after the passing of the bill in the House.[21]