House Passes Build Back Better Act

On November 19, 2021, the U.S. House of Representatives passed the highly anticipated Build Back Better Act. Democrats have been debating the scope of the legislation for months and, after several founds of changes, the House passed this version by a vote of 220 to 213. No Republicans voted in favor of the bill; only one Democrat voted against it. Passage followed the release of the bill’s estimated cost by the Congressional Budget Office (CBO). From here, the legislation moves to the U.S. Senate where it can be passed by a simple majority.

This post summarizes the coverage-related provisions included in the version that was passed by the House on November 19 and reflects the CBO’s analysis of the bill. There have been no major substantive edits to the bill’s coverage-related provisions since a draft released in early November. Those changes were summarized here. And prior posts on the legislation discussed provisions included in September 2021 and October 2021. But this post pulls all the information together, summarizing the current provisions included in the version of the Build Back Better Act that was passed by the House on November 19.

The legislation would, among many other changes, extend the most significant enhanced marketplace subsidies authorized under the American Rescue Plan Act (ARPA) through the end of 2025; close the Medicaid coverage gap through the end of 2025; and add hearing benefits to the Medicare program.

In its high-level analysis of the Committees on Energy and Commerce and Ways and Means proposals, the CBO estimates that these provisions could expand access to coverage for millions of people. In an estimate that is fairly consistent with a prior analysis, the CBO expects that the Build Back Better Act would reduce the number of uninsured people by 3.4 million from 2022 through 2025.

Most of these gains stem from filling the Medicaid coverage gap (which would reduce the uninsured by an estimated 1.7 million people) and extending enhanced marketplace subsidies (which would reduce the uninsured by an estimated 1.2 million people). Beyond the uninsured, the CBO expects an increase of 4.9 million people with individual market coverage and 100,000 more people with Medicaid while 1.6 million fewer people would have job-based coverage. (The Kaiser Family Foundation has additional analysis of the potential costs and impact of the Build Back Better Act.)

Marketplace Changes

Extending the enhanced ARPA subsidies for marketplace coverage is generally considered a must-pass item for Democratic members of Congress. Why? Failure to extend these subsidies would mean that millions of consumers would see their premiums rise in 2023. Consumers would get the news about rising premiums during the 2023 open enrollment period, which would begin in November 2022 (just ahead of the midterm elections).

The Build Back Better Act would extend the two most significant subsidy enhancements through the end of 2025 and one enhanced subsidy (for people who receive unemployment compensation) through the end of 2022. The legislation would also make other marketplace changes—such as revising the employer firewall and clarifying the treatment of lump-sum Social Security benefits—and authorize $10 billion in annual funding from 2023 through 2025 for states to establish a reinsurance or other affordability program for marketplace coverage. The legislation does not do everything that has been in prior ACA enhancement legislation or the Biden campaign platform. It does not, for instance, fix the “family glitch,” tie the ACA benchmark plan to a gold plan (as opposed to the current silver plan), or adopt a public option.

Enhanced Marketplace Subsidies

Consistent with the prior version of the Build Back Better Act, Congress would extend the enhanced ARPA subsidies for marketplace coverage. Collectively, these changes expanded the availability of premium tax credits (PTCs) to millions more people by eliminating the ACA’s subsidy cliff and bolstering existing subsidies for those who already qualified. The extension in the new legislation would allow ARPA subsidies to continue to flow to:

• Higher-income people (whose income is above 400 percent of the federal poverty level (FPL)) who did not previously qualify for PTCs under the ACA through the end of 2025;
• Lower-income people (whose income is between 100 and 400 percent FPL) who previously qualified for PTCs through the end of 2025; and

• Individuals who receive unemployment benefits and would thus qualify for maximal marketplace subsidies through the end of 2022.

ARPA subsidy enhancements have proven critical to increasing enrollment during 2021 and led to significant premium and out-of-pocket savings for marketplace consumers. But each of these ARPA subsidy enhancements are currently time limited. The first two are available for the 2021 and 2022 plan years while the third is available only for the 2021 plan year.

For the first two subsidies, the Build Back Better Act would adopt a subsidy structure that is identical to what was included under ARPA. Individuals whose income is 100 to 150 percent of FPL are currently eligible for no-premium coverage (i.e., they contribute no income towards premiums for a silver benchmark plan). The premium contribution increases on a sliding scale as income increases but is ultimately capped at no more than 8.5 percent of income for those with higher incomes (including those with income above 400 percent FPL).

The new legislation would temporarily waive the annual indexing of premium contributions, which caused these rates to increase over time. As written, these percentages (e.g., 0 percent to 8.5 percent) would remain flat until the 2027 plan year when they would be resume being adjusted annually.

The third subsidy enhancement—for those who receive unemployment compensation—would also be extended through the end of 2022 with an adjusted income level. Under ARPA, an individual who received (or is approved to receive) unemployment benefits during 2021 is treated as if their income is no higher than 133 percent FPL. The legislation would adjust this amount to treat those who qualify as having an income of 150 percent of the FPL. Even with this change, those who receive unemployment benefits would receive maximal subsidies for ACA coverage, including no-premium coverage.

Tweaking The Employer Firewall

In a change that goes beyond ARPA, the Build Back Better Act would modify the so-called “firewall” to be better aligned with the enhanced marketplace subsidies noted above. As discussed more here, the employer firewall prevents workers with an offer of affordable, minimum value job-based coverage from receiving PTCs for marketplace coverage. Under the ACA, an employee’s job-based coverage is considered “affordable” if the employee contributes less than 9.5 percent of their household income towards premiums. This percentage has been adjusted each year and, for 2021, is 9.61 percent.

Thus, under current law, employees can be asked to contribute nearly 10 percent of their household income towards premiums alone before qualifying for affordable marketplace coverage. The Commonwealth Fund estimated that 26 percent of low-income people with job-based coverage lived in households that spent more than 8.5 percent of their income on after-tax premium contributions.

The Build Back Better Act would not eliminate the employer firewall. But it would better align the employee contribution with the enhanced subsidies by reducing the employee contribution from 9.5 percent to 8.5 percent for the 2022 plan year through the 2025 plan year. As with the subsidies, the legislation would temporarily waive the annual indexing of this rate so that it would remain steady at 8.5 percent through the 2027 plan year.

Treatment Of Lump-Sum Social Security Benefits

The Build Back Better Act would amend the calculation of modified adjusted gross income for purposes of calculating PTC eligibility to exclude lump-sum Social Security benefits. Members of Congress have previously raised concerns about the Internal Revenue Service treating these lump-sum benefits as income towards a single year (as opposed to the several years for which the benefits are earned). When treated as income for a single year, a lump-sum payment can significantly reduce or eliminate an enrollee’s marketplace subsidy for that year—or require the individual to owe the government significant excess advance PTCs at tax time.

The proposed provision would go into effect in 2022 and ensure that such payments do not count as income for purposes of PTCs. Taxpayers could opt out of this provision beginning with the 2026 plan year.

Exclusion Of Certain Dependent Income

The Build Back Better Act would further amend the calculation of modified adjusted gross income by excluding the income of dependents who are under the age of 24 for purposes of calculating PTC eligibility. This change would go into effect beginning with the 2023 plan year and terminate with the 2027 plan year. This income calculation would be used solely for determining eligibility for PTC and cost-sharing reductions (and not for eligibility for Medicaid, CHIP, or the Basic Health Program).

The only exception appears to be if the income from all dependents under the age of 24 exceeds $3,500. The $3,500 amount would be indexed beginning with the 2024 plan year and increase every year based on a cost-of-living adjustment. Applicants would have to report this information to the marketplace.

Funding for Reinsurance And Affordability Programs

The Build Back Better Act would—for 2023, 2024, and 2025—provide $10 billion in annual funding for states to 1) establish an individual market reinsurance program (which would not include grandfathered plans, transitional plans, student health insurance coverage, or excepted benefits); or 2) reduce premiums and out-of-pocket costs for marketplace or BHP enrollees. Federal funding for these types of efforts would allow for experimentation and state-specific approaches. A similar program has been included in prior House legislation, and 15 states have approved state-based reinsurance programs that have helped hold down premiums.

States would have to apply for these funds—within 120 days of enactment of the legislation to receive funds for 2023—but would be automatically approved unless the Department of Health and Human Services (HHS) notifies the state otherwise. Approval would remain in effect through 2025 and could be revoked by HHS if a state failed to use the money as required. States without Medicaid expansion would not be eligible to apply for this federal funding. Instead, HHS would operate the reinsurance program in those states and have additional flexibility to adjust reinsurance parameters as needed. The legislation would require HHS to decide how much each state can receive of the $10 billion in annual funding.

The legislation would also amend existing BHP rules to account for this reinsurance funding. This is a need in light of challenges in Minnesota, which is the only state with both a BHP and a Section 1332 waiver for a state-based reinsurance program. (New York is the only other state with the BHP.)

Minnesota had a pre-ACA coverage program for low-income people that it later conformed to the BHP. After that, the state applied for and was approved in part for a reinsurance waiver. State officials asked the Trump administration to continue to calculate BHP payments in a way that disregarded the effects of the reinsurance waiver, but federal officials declined to do so. This led Minnesota to receive lower federal funding for the BHP without compensatory federal pass-through funding under Section 1332. Minnesota officials have long complained about this underpayment and recently asked that this methodology be reconsidered. HHS is reviewing the request and suggested that future BHP rulemaking will reflect “potential approaches” to address the intersection of these two programs.

The legislation would help prevent a similar problem in the future. The bill would require states with a BHP, beginning with the 2023 plan year, to submit the “adjusted premium amount” for each qualified health plan that receives a reinsurance payment under this new program. This adjusted premium amount is the premium that would have been paid in the absence of the new reinsurance program created under this legislation. HHS would then calculate what states are owed for PTCs under the BHP using the adjusted premium amount, such that state BHPs are not penalized.

The law would allow HHS to implement this new program using subregulatory guidance, meaning new rulemaking would not be required.

Funding For Section 1332 Waivers

The legislation would authorize $50 million to support states in pursuing Section 1332 waivers. These new “administration and planning grants” would be available for fiscal year 2022 and could be used by states to develop new waiver applications, prepare applications for waiver extensions or amendments, or implement an approved waiver. Each grant would be limited to $5 million, and states could use the funds until the amounts are fully expended.

Funding For Consumer Assistance Programs And Enforcement

The Build Back Better Act would authorize a total of $100 million for consumer assistance programs for 2022 with $25 million to be made available annually for 2022, 2023, 2024, and 2025. Consumer assistance programs help consumers with complaints and appeals, track consumer concerns, educate consumers about their rights and responsibilities, assist consumers with enrollment (in all coverage, including employer coverage), and resolve challenges with PTCs.

These programs offer valuable services and are not limited to certain programs (such as marketplace coverage or Medicaid). With new funding, consumers assistance programs could play an even greater role in helping educate consumers (and then assisting them with filing complaints) on a whole range of topics, including implementation of the No Surprises Act next year.

The legislation would also provide financial resources to federal agencies for purposes of enforcing federal laws. The Employee Benefits Security Administration, within the Department of Labor, would receive $195 million to carry out enforcement activities through September 30, 2026. The Occupational Safety and Health Administration, also within the Department of Labor, would receive $707 million for enforcement, whistleblower investigations, compliance assistance, and funding for state plans, among other efforts. Federal officials could also impose new civil monetary penalties against group health plans and administrators that fail to comply with federal mental health parity laws.

Medicaid

Closing The Medicaid Coverage Gap

The legislation would close the Medicaid coverage gap from January 1, 2022 through December 31, 2025. This “gap” refers to individuals who are unable to qualify for Medicaid but are ineligible for marketplace subsidies because their incomes are too low. Congress intended for low-income adults whose income is up to 138 percent of the poverty level to be eligible for Medicaid coverage in all states. However, in National Federation of Independent Business v. Sebelius, the Supreme Court held that states could not be required to expand their Medicaid program as a condition of continued federal funding for the existing Medicaid program. As a result, Medicaid expansion became optional for each state.

To date, 38 states and DC have expanded their Medicaid programs while 12 states have not. These 12 states have opted not to do so even in the face of significant financial incentives. Under ARPA, non-expansion states that choose to expand receive a temporary increase of 5 percentage points in the federal matching rate for non-expansion populations (in addition to the 90 percent federal match rate for the expansion population). If all 12 states were to expand their programs, they would receive (collectively) a total of $16.4 billion in federal funds over two years for the cost of about $6.8 billion in expansion.

These incentives notwithstanding, states continue to balk at expansion. As a result, more than 2.2 million low-income uninsured adults who would have otherwise qualified for Medicaid coverage are left without affordable coverage. Most of these people live in just four states: Florida (19 percent), Georgia (12 percent), North Carolina (10 percent), and Texas (35 percent). The remaining eight states account for about 24 percent of this population. In 2019, an estimated 60 percent of people in the Medicaid coverage gap were people of color. And income fluctuations and volatility among low-income people can result in frequent churn and coverage losses, suggesting that many more people are affected by the coverage gap during the course of the year.

(We typically think of the coverage gap as those whose income is below the poverty line. But an additional 1.8 million people have an income between 100 and 138 percent of the federal poverty level. These individuals currently qualify for heavily subsidized marketplace coverage but would, if their state had Medicaid expansion, qualify for Medicaid.)

To close the coverage gap, individuals whose income is under the poverty line would newly qualify for subsidized marketplace coverage beginning on January 1, 2022. This eligibility would extend through December 31, 2025, meaning individuals in the coverage gap would qualify for marketplace coverage for all of 2022, 2023, 2024, and 2025.

The bill does not single out the current 12 Medicaid non-expansion states and would instead make this option available nationwide. But, under long-standing ACA rules, if someone is eligible for Medicaid, they are ineligible for PTCs through the marketplace. That rule is unchanged, meaning the coverage gap program would operate only in states that do not extend Medicaid eligibility to the expansion population.

The Build Back Better Act would amend existing ACA rules on PTCs and cost-sharing reductions (CSRs). Currently, PTCs and CSRs are only available to those whose income is above the federal poverty level and who meet program requirements (such as not being eligible for other types of minimum essential coverage). To ensure that individuals who fall in the Medicaid coverage gap can access marketplace subsidies, the legislation would amend current law to create temporary rules for the 2022, 2023, 2024, and 2025 plan years. HHS would have $65 million to implement these changes.

In general, these temporary rules would waive existing PTC requirements—such as the employer firewall and the need to repay excess advance PTCs at tax time—for those whose income is less than 138 percent of the poverty level and who do not qualify for government-sponsored minimum essential coverage. There are also special rules related to the employer mandate, enrollment periods, benefits, CSRs, and education and outreach. In addition to not being required to repay excess advance PTCs, eligible individuals would not need to file a tax return if they otherwise would not have had to do so.

From 2022 through 2025, individuals whose household income is less than 138 percent of the poverty level (at any time during the year) could enroll in marketplace coverage on a continuous basis. This is in contrast to other marketplace enrollees whose enrollment opportunities are limited to the open enrollment period or special enrollment periods. A continuous enrollment period is consistent with the Medicaid program, which offers year-round enrollment.

HHS would be required to conduct outreach to inform the Medicaid coverage gap population about the availability of marketplace coverage. HHS would have $15 million for 2022 and $30 million each for 2023, 2024, and 2025 for outreach and education efforts. HHS would also have to obligate at least $10 million from ACA user fees for 2022 and $20 million each for 2023, 2024, and 2025 towards these activities. In conducting outreach and education, HHS could not promote non-ACA plans (such as short-term plans) and would have to conduct outreach to diverse and other underserved communities.

Insurers would be required to cover additional benefits, without cost sharing, for this population during the 2024 and 2025 plan years. These benefits—non-emergency medical transportation services and family planning services and supplies—are generally unique to Medicaid. HHS would be required to reimburse insurers for the costs of these extra benefits, with funds appropriated for that purpose.

With respect to CSRs, qualifying individuals would be treated as if their income were 100 percent of the poverty level for 2022. As such, they would qualify for maximal CSRs that could boost their plan’s actuarial value to 94 percent. For the 2023, 2024, and 2025 plan years, insurers would be required to offer plans with an actuarial value of 99 percent. This option would be available only for this population, meaning this is not a new permanent CSR tier; HHS would establish procedures as to how insurers must reduce cost sharing for this population. The legislation includes an appropriation for this new CSR tier but not for the other tiers; this preserves the ability for insurers to continue silver loading.

The bill would add an exception to the ACA’s employer mandate for those whose household income is less than 138 percent of the poverty level. The employer mandate would thus not be triggered if an employee at this income level received PTCs from 2022 through 2025.

Finally, the legislation would reduce the amount of money that the federal government could claw back if a low-income consumer misestimated their income and received too much advance PTC. Those whose household income is 200 percent of the poverty level or lower would owe no more than $300 in this scenario, down from $600 (unindexed) under current law from 2022 through 2025.

Additional Medicaid Policies

The Build Back Better Act would build significantly on Medicaid and CHIP and make many changes that are not discussed fully or in detail here. The law would, for instance, require 12 months of continuous eligibility for children and postpartum women in Medicaid and CHIP and authorize permanent funding for CHIP coverage (which would avoid future funding cliffs like those we have seen in recent years). It would also extend Medicaid coverage to justice-involved people prior to their release and improve access to vaccines for adults under Medicaid and CHIP.

Congress would adjust Medicaid and CHIP funding in other ways. States with Medicaid expansion would see a three-percentage point boost to the federal matching rate for the expansion population—from the current 90 percent to 93 percent for 2023, 2024, and 2025. After 2025, federal officials would resume paying the 90 percent federal matching rate for the expansion population. The territories would receive a permanent federal matching rate of 83 percent, and urban Indian organizations and Native Hawaiian Health Centers would receive a 100 percent federal matching rate for an additional two years.

The law would also eliminate or adjust uncompensated care pools and Medicaid disproportionate share hospital payments in non-expansion states. Because coverage gap individuals would be newly enrolled in marketplace coverage, the need for federal funding for uncompensated care and the uninsured would be reduced and Congress wants to redirect those resources. Additional analysis of these provisions is available here from the Kaiser Family Foundation.

With the goal of minimizing coverage disruption at the end of the public health emergency, the Build Back Better Act includes a maintenance-of-effort provision for Medicaid. This provision would amend a currently-in-place maintenance-of-effort requirement adopted under the Families First Coronavirus Response Act (Families First) that provides states with a 6.2 percentage point increase in their federal matching rate. Under the new provision, states would need to maintain current eligibility standards, methodologies, and procedures that were in place on October 1, 2021 from October 1, 2022 through December 31, 2025. States that fail to do so could have their federal matching rate reduced by 3.1 percentage points, although the provision allows states to waive this requirement in some circumstances.

Separately, the legislation would taper off the existing 6.2 percentage point increase in federal matching under Families First. This increase would be available through March 31, 2022 but would drop to 3 percentage points from April 1, 2022 through June 30, 2022 and then down to 1.5 percentage points from July 1, 2022 through September 30, 2022 (when the enhanced match would expire). Eligibility redeterminations, subject to federal rules and new requirements in the legislation, would also be allowed beginning on April 1, 2022 without the loss of these enhanced federal matching rates. The legislation is explicit about this because eligibility redeterminations were effectively halted under Families First: states would not be eligible for the enhanced federal match if they conducted these eligibility redeterminations. Here, the Build Back Better Act would provide guidance and establish a schedule for completing these Medicaid eligibility redeterminations, with the goal of ensuring orderly transitions away from Medicaid for those who may have lost their eligibility during the public health emergency.

Caps On Cost Sharing For Insulin Products

Beginning with the 2023 plan year, group health plans and insurers offering individual or group health insurance coverage would be required to cover certain insulin products on a pre-deductible basis and with limited cost sharing. Cost sharing would be capped at $35 or 25 percent of the negotiated price, whichever is lower, for a 30-day supply of insulin. Any associated out-of-pocket costs would be counted towards a consumer’s annual deductible and out-of-pocket maximum. CBO estimates that these new requirements will cost, on average, $2 billion annually.

Insurers that offer qualified health plans under the ACA would not account for this requirement when determining the plan’s actuarial value. Catastrophic plans would also have to comply with this requirement and would not fail to meet the other requirements for catastrophic coverage simply for covering pre-deductible insulin products.

The legislation would define both “insulin” and “selected insulin products” and makes clear that plans and insurers could charge higher cost sharing for products that do not meet these definitions. Higher cost sharing could also apply if a consumer receives the selected insulin products from an out-of-network provider.

Oversight Of PBMs

Insurers and pharmacy benefit managers (PBMs) would be required to provide employers and other plan sponsors with a detailed report on drug coverage every six months. The report would reflect information on dispensed drugs, utilization, costs, out-of-pocket spending, drug manufacturer copay assistance, and compensation paid to brokers and other consultants, among many other data elements laid out in the law. The law would impose civil monetary penalties for violating these requirements, and insurers and PBMs could not enter into contracts with gag clauses that prevent these disclosures.

Reports would be required in a machine-readable format, and these entities would have to comply with federal privacy standards to protect employee data. Group health plans, insurers, and PBMs could restrict public access to cost data but would have to disclose reported information to federal officials. Federal agencies would also be required to develop separate, more limited reporting requirements. This requirement would go into effect for plan years that begin on or after January 1, 2023.

Adding Hearing Benefits To Medicare

Beginning on January 1, 2023, the Medicare program would cover hearing aids, aural rehabilitation and treatment services, and hearing assessment services by qualified audiologists or hearing aid professionals. Hearing aids would be covered as a prosthetic device under Medicare Part B; beneficiaries diagnosed with profound, severe, or moderately severe hearing loss in one or both ears could qualify for hearing aids every five years. Audiologists and hearing aid professionals would qualify for Medicare reimbursement. HHS could implement these provisions for 2022 and 2023 using program instructions, as opposed to rulemaking, and would have $370 million to implement these changes.

Health Coverage Tax Credit

The Build Back Better Act would make the health coverage tax credit permanent. The health coverage tax credit (not to be confused with PTCs) is a separate federal refundable tax credit for a portion of premiums for qualifying individuals. This tax credit is available only to individuals eligible for Trade Adjustment Assistance allowances because of qualifying job losses or individuals whose defined-benefit pension plans were taken over by the Pension Benefit Guaranty Corporation.

The health coverage tax credit is set at 72.5 percent and was scheduled to sunset on January 1, 2022. The Build Back Better Act would increase the credit to 80 percent beginning in 2022 and make this tax credit permanent.