Benefits & Compensation News

New bill’s solution to ACA problem: Let the states decide

A number of ACA-related bills have been introduced recently, but this particular piece of legislation has stood out from the list for a number of reasons.

Introducing the Patient Freedom Act (PFA), a bill sponsored by Senators Billy Cassidy (R-MD) and Susan Collins (R-ME), along with Shelly Moore Capito (R-WV) and Johnny Isakson (R-GA).

If passed, the bill would repeal the ACA’s individual and employer mandates, the actuarial value regs and the requirements to cover specific treatments and services. In its place, state would be able to individually decide between one of the following three options:

Choice 1: Reinstate the ACA. This reinstate includes the mandates and other requirements as well as the access to the federal marketplace with premium tax credits and cost-sharing subsidies.

The difference: It would only be funded at a level of 95% of the amounts available under the current ACA.

Choice 2: Adopt a new “state and market-based alternative.” This option would provide guaranteed coverage, including coverage for pre-existing conditions. The individual states could also continue to receive funding equal to 95% of the federal premium tax credits and cost-sharing subsidies under the current ACA structure in addition to the federal match for Medicaid expansion.

The difference: The cost-sharing subsidies under the PFA would be deposited in newly created Roth Health Savings Accounts (Roth HSAs) that would be owned by individual accountholders. Any of these Roth HSA funds that weren’t spent on qualified medical expenses would be taxable. Plus, accountholders under the age of 65 would get hit with an additional 10% penalty. Individuals would also have the option to contribute — within the predetermined limits — to their Roth HSA.

Choice 3: Create an alternative solution. This alternative would have to regulate insurance markets without federal assistance for residents not eligible for Medicaid. Coverage under this option would still be subject to some regs held over from the ACA, including the coverage of adult children up to age 26, the ban on lifetime and annual limits and the reg that prohibits pre-existing exclusions.

An appeal to the other side

Policy experts view legislation such as the PFA as a Republican attempt to garner Democrat support for an ACA overhaul. As Timothy Jost, a Washington and Lee University School of Law professor, explains:

“It has become increasingly clear in recent days that Republicans are trying to find a way to couple ACA repeal with ACA replacement. The PFA is an attempt to build a replacement plan on Republican principles of devolution of responsibility to the states and deregulation, but in a way that might appeal to some Democrats. The bill, however, appears to have been rushed into legislative language without adequate consideration of how it would actually work and what it would cost. It may form a basis for discussion, but it is not ready for enactment.”

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