New Senate healthcare bill allows insurance plans with fewer benefits, keeps Medicaid cuts

Senate Republicans have released a new version of their Affordable Care Act (ACA) replacement plan, adding new funding for stabilizing the individual market and keeping more of the ACA’s taxes, while also including a controversial proposal to allow insurance plans which don’t comply with ACA regulations on benefits and community rating.

This provision of the Better Care Reconciliation Act (BCRA) is based on an amendment championed by Sen. Ted Cruz, R-Texas, one of the conservative holdouts who wanted to see the legislation repeal more of the ACA. Under his proposal, insurers can access a fund to cover high-cost patients by offering at least one plan in a state that complies with ACA regulations. They’ll also be allowed to offer non-compliant plans which don’t cover the law’s essential health benefits, while insurers can charge customers more based on their health status.

Before the bill was released, insurers said the original amendment would destabilize the individual market, turning ACA-compliant plans into a de facto high-risk pool as healthier customers would opt for the skimpier, less expensive coverage.

Increasing consumer choices for insurance is a key talking point for the Republican proposal. Along with the Cruz amendment, the new bill would allow customers to pay for premiums out of health savings accounts and use tax credits for buying catastrophic health plans.

In contrast to the conservative-minded changes, billions in new funding has been attached to the legislation to attract support from moderate Republicans. An additional $70 billion—on top of the $100 billion already promised—would be available for individual market stabilization efforts, like reinsurance programs. Another $45 billion would fund anti-opioid abuse programs.

To offset some of the new funding, certain ACA taxes the original bill would have repealed survive in the new version. Among them would be a $500,000 cap on an individual executive's compensation that a health insurer could deduct as a business expense.

Medicaid expansion, however, is still rolled back by 2024, and long-term funding for the program would still be changed to a block grant or per-capita allotments, with the growth rate tied to overall inflation, not medical inflation. These changes were the main reason several moderates publicly opposed the first version of BCRA.

A new provision in the bill would allow states to get waivers from new Medicaid limits to expand home health and community-based care programs for elderly patients. Costs for public health emergencies also wouldn’t count against the new funding limits.

Many hospitals’ concerns have also been left unaddressed by the new bill. With the Medicaid provisions largely staying the same, a considerable rise in the number of uninsured would still be expected, leading to increased uncompensated care costs. In one positive for hospitals, the calculation for Medicaid’s disproportionate share hospital (DSH) payments would change, being based on the number of uninsured rather than a per-beneficiary basis.

The Congressional Budget Office (CBO) is expected to release an updated analysis on the BCRA early next week. Reports on the first version said it would lead to 22 million more people being uninsured, higher out-of-pocket costs, insurance market instability in certain areas and 35 percent lower spending on Medicaid by 2036 compared to current law.