Senate Healthcare Bill May be More Favorable to Insurers Than House Version

Better Care Reconciliation Act would structure subsidies differently than the American Health Care Act.

Last week, GOP Senate leaders released their version of the Affordable Care Act (ACA), called the Better Care Reconciliation Act (BCRA) of 2017. Much like the American Health Care Act (AHCA) that was passed by the House, the BCRA would make changes to Medicaid and repeal key provisions of the ACA.

Review our coverage of the Better Care Reconciliation Act.

While many of the proposals in both bills are similar, the BCRA allows subsidies to be structured differently than the House bill.

“Where the House bill gave subsidies based on age, the Senate bill expanded that to age, income, and geographic location. They are making the subsidies easier to get than originally proposed,” Laura Adams, senior insurance analyst at InsuranceQuotes.com, said in an interview with The American Journal of Pharmacy Benefits. “That’s good for everyone who’s older and lower income, but those older populations are more likely to see premiums go up.”

Despite higher subsidies under the Senate bill, older Americans may still be charged up to 5 times as much as a younger person. This mandate was first introduced under the House bill.

Additionally, older adults, who are more likely to have chronic conditions, may experience drastic premium increases depending on which state they reside in. Under the legislation, states can choose to waive the mandate that patients with preexisting conditions may not be charged more.

“A major change is that it is putting more power into the hands of the states to customize the plans that they offer and decide whether consumers are going to get penalized for preexisting conditions,” Adams said.

While the Senate bill may still not be the ideal plan for older patients, those with pre-existing conditions, or low-income individuals, insurance companies may view it more positively than the ACA in some respects, according to Adams.

“One of the upsides of the House bill is that they are allowing older Americans to be charged more. Where Obamacare said that older Americans could only be charged 3 times that of a young person, the newest proposal is allowing 5 times that of a younger person,” Adams said.“From an insurance company’s perspective, it bodes well for higher premiums and makes them feel more confident that they can be profitable. That is one aspect that the insurance companies are likely to see in their favor.”

Under the Republican legislation, the individual mandate would be repealed, meaning that there would no longer be a penalty for not being insured. This was a key driver of repealing the ACA, but how it would affect the stability of the marketplace is unknown. On one hand, the provision was not observed to improve stability under the ACA, but it is uncertain how its absence will affect the market.

“Even though the mandate is taken away in the House and Senate bills, young people are going to play a big role here. If people don’t enroll until they get sick, that makes a very unstable marketplace. Insurance companies don’t like to see instability. They want to set their premiums, have a business model in place, and feel confident they will be profitable based on that plan,” Adams told AJPB. “There’s a lot of speculation about what’s going to happen. If we continue to see many young people not getting coverage, it is not going to help the insurance market and it is not going to stabilize it.”

Even if passed as is, the bills would slowly repeal or replace aspects of the ACA, which would be seen as favorable by insurers. Overhauling the entire healthcare system at once has the potential to lead to significant gaps and uncertainty for both patients and insurers.

This would lead to a potentially unstable market, making a fast repeal discouraging to insurers. Additionally, since insurers draft plans and premiums at least a year in advance, a slower repeal would allow them to alter their business models to comply with new federal regulations.

Due to the criticism over the House bill, Adams expects that there will be similar levels of outrage from the public and lawmakers over the Senate bill. This will likely lead to revisions of the BCRA, especially when it comes to funding for Medicaid.

“Some of the changes [in the BCRA] are going to help the bill pass and some of the changes make it easier for insurance companies to implement. That’s good news,” Adams told AJPB. “The bad news is that it does make pretty deep cuts to Medicaid. For many people, the line is drawn there and they’re not going to accept those changes. Because of that, I think we will see a lot of pushback.”