Health Reform WK-EDGE Leaked draft bill changes subsidies, Medicaid funding; creates new ‘Cadillac tax’
Monday, March 6, 2017

Leaked draft bill changes subsidies, Medicaid funding; creates new ‘Cadillac tax’

By Kayla R. Bryant, J.D.

A leaked discussion draft of a House health reform bill would repeal several foundational policies found in the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148), including income-based subsidies and the individual mandate. House committees initially declined to comment on the specifics of the leaked draft, but some GOP representatives began speaking out about their opposition to certain elements of the draft bill. Other statements indicate that the draft differs from the current version under consideration, and that the leaked version is not considered viable.

Changes. Current subsidies provide tax credits based on income to assist consumers when buying plans on the health insurance marketplaces. The draft bill would give tax credits based on age, ranging from $2000 to $4000, based on income. This change would take place in 2020, at the same time that states would begin receiving less money for covering the Medicaid expansion population in the form of capped payments based on the number of enrollees—known as per capita caps, which are different from the "block grant" fixed sum that is not based on enrollment. However, states would receive $100 billion in state innovation grants intended to subsidize coverage of expensive enrollees, although the draft bill offers less protection of those with pre-existing conditions than the ACA.

Revenue. Due to the changes, the only revenue-generating provision would be taxing employer-sponsored insurance above the 90th percentile of premiums, like the current Cadillac tax in the ACA. As part of the effort to stabilize the insurance market, the legislation would allow insurers to raise premiums for older consumers up to five times the amount paid by younger enrollees. The current ratio is capped at three times the amount. Additionally, consumers could be charged an additional 30 percent in premiums for a year if they fail to maintain continuous coverage and later re-enroll.

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