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Part VI: An Update on the American Health Care Act

In Part V of our blog series, Very Opaque to Slightly Transparent: Shedding Light on the Future of Healthcare, we outlined some of the key provisions of the American Health Care Act (AHCA). Roughly two weeks after our post was published, GOP congressional leadership pulled the legislation from a floor vote, recognizing that the bill did not have sufficient support to pass in the U.S. House of Representatives. Nevertheless they persisted, and an amendment to the legislation negotiated in substantial part by Representatives Tom MacArthur and Mark Meadows injected new life into the AHCA. The so-called “MacArthur Amendment” sought to bridge the gap between conservative Republican members of the House Freedom Caucus and more moderate GOP members of the House, and an additional amendment – the “Upton Amendment” – helped seal the deal. With those two amendments attached, the bill narrowly cleared the House on a party-line vote (albeit with some GOP defectors), 217-213.

At its core, the MacArthur Amendment’s fundamental purpose is to permit states to seek and obtain waivers from several key provisions of the Affordable Care Act (ACA) and to establish a high-risk pool or participate in a new federal “invisible risk-sharing program.” Specifically, states could seek a waiver for ACA requirements surrounding essential health benefits (a set of benefits that some health insurers are required to cover) and community health ratings (which prevent insurers from charging people different premiums based on health status). A state that is granted the above waivers would be permitted to dictate the types of benefits that insurance companies would be required to provide, and insurers in such states would be able to set premiums based on a beneficiary’s current and past health status. Those with conditions that are traditionally expensive to insure could be placed in a state-sponsored high-risk pool.

Critics of the MacArthur Amendment claim that the waiver provisions could be catastrophic for people with pre-existing conditions in waiver states. While insurers would still be required to offer coverage to those with pre-existing conditions, opponents contend that the ability to engage in medical underwriting (i.e., the practice of looking to a potential enrollee’s health status in setting premium rates) would lead to premiums so high that such people wouldn’t able to afford coverage in the first place. While such individuals may receive coverage through high-risk pools, detractors point to studies indicating that such risk pools are ineffective and would be substantially underfunded. A good primer on the feasibility of high-risk pools was published by The Commonwealth Fund, a private nonpartisan foundation, in 2014. Others worry that even individuals in non-waiver states could be adversely affected. For example, under current law, ERISA plans have the flexibility to adopt any state’s definition of essential health benefits for purposes of providing legally adequate healthcare coverage. Accordingly, some argue, if a single state obtains a waiver and implements lax essential health benefits standards, large employers could potentially select those standards as their benchmark, thereby subjecting all employee plan participants to reduced coverage requirements regardless of their state of residence.

The Upton Amendment was intended to appease moderates concerned about the potential loss of coverage occasioned by the MacArthur Amendment. The amendment would allocate $8 billion over five years to help states fund high-risk pools. However, critics of the Upton Amendment object to the proposed fix on the same grounds that they object to the sustainability of high-risk pools in general, namely, that such funds are woefully inadequate to cover the necessary costs of operating a successful high-risk pool.

Notwithstanding the AHCA’s passage in the House, a number of additional hurdles must be cleared before it is enacted into law. To start, the legislation must pass the Senate, and a number of GOP Senators have already expressed deep reservations about the AHCA in its current form. In addition, in order for the bill to pass the Senate with a simple majority, the Senate parliamentarian will have to determine whether or not the bill complies with the “Byrd Rule,” which generally requires that the legislation in question relate to the budget and does not add to the deficit in the long term. Supposing that the Senate parliamentarian makes a favorable determination, to the extent that a majority of Senators pass an alternative bill, differences between the House and Senate bills will need to be reconciled in conference committee, and then pass the House and the Senate yet again. Given the slim margins by which the AHCA passed the House and the nature of the concerns voiced by GOP Senators, there is a possibility that the legislation that comes out of the conference committee will face conservative resistance in the House. In short, we have a long way to go before the AHCA becomes the law of the land.

Copyright © 2017, Sheppard Mullin Richter & Hampton LLP.

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About this Author

Ken Yood, Corporate, Healthcare, Attorney, Sheppard Mullin, law firm
Partner

Mr. Yood is a partner in the Corporate practice group in the firm's Los Angeles office.

Mr. Yood represents a wide range of healthcare providers and healthcare companies, including specialty and general acute hospitals (including local district, nonprofit and for-profit facilities), home health agencies, pharmaceutical vendors, nursing facilities, and health information and management providers.

310-228-3708
Associate

Matthew Goldman is an associate in the Corporate Practice Group in the firm's Century City office and is a member of the firm's healthcare practice team.

Areas of Practice

Matthew’s practice blends the regulatory and transactional components of healthcare law, and includes representation of hospitals, managed care organizations, medical groups, and other healthcare entities and providers. On the regulatory side, Matthew’s practice is focused on licensing, regulatory compliance, and managed care arrangements. Matthew has extensive experience preparing Knox-Keene HMO license applications and assisting clients with structuring shared-risk arrangements, developing and utilizing innovative payment methodologies, and ensuring compliance with applicable federal and state law. Matthew’s transactional practice is focused on mergers and acquisitions, joint ventures, and strategic alliances in the healthcare sector. 

310.228.2285
Associate

Jordan Grushkin is an associate in the Corporate Practice group in the firm's Century City office.

  • J.D., Georgetown University Law Center, 2015

  • B.A., Georgetown University, 2015, magna cum laude

310.228.6152