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Pushing ownership to the states: the impact of the Better Care Reconciliation Act (BCRA) of 2017

By Jeff Cameron, PA healthcare expert

Note: this is Part 5 in our post-election series, Navigating Uncertainty.

On Thursday, June 22, 2017, the Senate Republican leadership released a draft of its healthcare bill, called the Better Care Reconciliation Act (BCRA) of 2017, ending weeks of speculation around the content and proposed changes that frustrated Democrats and even some Republicans. The proposed response places the next level of decision making in the hands of the states.

Funding changes and the impact on the role of the State

The BCRA bill is designed to provide states with the freedom for individual reform and to allow states to best manage their unique circumstances. For instance, reform in New York should and will look very different than reform in Tennessee, as their circumstances differ.

It is also important to note that the bill is dependent on a reduction in state funding for Medicaid over the coming years, and there is concern by some that the reduction in Medicaid spending is not aggressive enough. However, in order for states to succeed under the new plan, there will be a requirement to reduce Medicaid rolls in the long term. This will lead to a reduction in the millions of people added to Medicaid by the Affordable Care Act’s Medicaid expansion, in addition to further reductions needed by each state.

States have a few options to align the rolls with the funding capacity, including improved health programs and back-to-work initiatives, as well as seeking funding alternatives to replace federal dollars. Overall, each state has some key decisions to make on how it implements changes to Medicaid going forward.

But what are the actual funding changes purposed in the BCRA? It lessens tax increases and reduces commitments to those on government assistance by scaling back health coverage funding for low-income Americans and tax credits for middle-income earners who purchase their own health insurance. It also provides provisions to stabilize the current insurance market. It is not yet clear if this will impact health plan decisions to participate in the exchanges.

In the coming weeks, states will have to decide on their approach to the below BCRA provisions:

  • Lower level funding of the Patient and State Stability Fund (PSSF), a grant program intended to stabilize individual and small group state insurance markets and lower patient costs. It remains to be seen how each state will utilize this fund. For example, states could transfer a portion of their high risk and high cost members to high risk plans, changing how key health plans will analyze each state and their exchanges.
  • Essential healthcare benefits can be waived at the state level. States that implement the waiver will be able to offer lower benefits. However, the community rating1 would remain and states must comply. This will allow for standard rates in the community for covered persons of the same age and help to set standard rates for people with existing conditions.
  • A one-time funding provision for 2018 in key states to address the opioid crisis2. This is clearly a mechanism to win votes and does not address the ongoing reform needed at the state level.
  • No funding for abortions or healthcare providers involved in abortion, effectively defunding Planned Parenthood. It is not clear if this will pass a Senate vote.

For states, the reduction in Medicaid funding over time is likely to fuel grassroots and political momentum for the implementation of local single government payer models of care. At a minimum, it is clear that the states are going to need to take a more active role in healthcare reform. The ability to execute ACA innovation waivers, and the ongoing uncertainty around Medicaid funding and other programs such as Planned Parenthood, tax credits and cost sharing may ease the passing of single-payer bills. 

This could cause state governments to increase taxes and potentially eliminate premiums, deductibles and out-of-pocket expenses. Medicaid and not-for-profit insurance companies with a regional focus are well-placed to capitalize from a ‘Medicaid for all’ system with reduced government reimbursement. We may also see a consolidation of the regional players to fewer plans as the states begin to manage cost and the population’s health more aggressively. 

Next steps 

While health insurance is complex, it is also highly personal. There is a strong need for each state to communicate how it will respond to the latest bill and what direction it will take so that consumers understand their options, and how the proposed changes will impact them. It is also essential that payers take a new look at these changes and realize the impact on their specific situation and prior decisions.

This is an important moment for healthcare reform, and one that brings the state and payers closer together to meet the needs of the consumers. State innovation and a move toward key areas of reform will be essential to consumer satisfaction. It is time for states to put together an action plan and strategy that brings about reforms that are desperately needed.


1 Community rating is a concept usually associated with health insurance, which requires health insurance providers to offer health insurance policies within a given territory at the same price to all persons without medical underwriting, regardless of their health status.

2 https://www.hhs.gov/opioids/about-the-epidemic/index.html

To speak to one of our experts about the impact the Better Care Reconciliation Act could have on your organization, get in touch today.

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