Healthcare in America: The Long and Winding Road to Where?
Executive Summary
The House of Representatives passed H.R. 1628, the American Health Care Act (AHCA), by a narrow 217 to 213 vote, with the margin largely falling along party lines. (Interestingly, a sizeable number of Republican House members chose not to support the measure as endorsed by President Trump and Speaker Paul Ryan.)
AHCA is the Republican legislative vehicle that nullifies and reforms an array of Affordable Care Act provisions (“ACA;” otherwise known as Obamacare). Although this activity means that employers move one step closer to seeing meaningful ACA changes, and this is an undeniably crucial phase for the Republican ACA-repair effort trumpeted by the President -- plan sponsors should note that there’s still a long road ahead before a final bill reaches the President’s desk.
Right now the measure includes the following key provisions:
Employer mandate (“Employer Shared Responsibility”): Penalties would be eliminated retroactively to January 1, 2016.This element of the AHCA would generally liberate employers from difficult compliance burdens associated with: the administration of measurement periods to identify full-time employees,offering minimum essential coverage to 95% of full-time employees; ensuring that coverage is affordable (not greater than 9.69% of employees household income or one of the three IRS safe harbors), appealing Exchange/HHS notices for failure to comply with the Employer Shared Responsibility provisions and measuring applicable large employer (ALE) status.
ACA reporting: Limited relief from employer reporting requirements for ALEs; but with access to marketplace tax credits continuing to hinge on an individual’s inability to access employer health coverage, some reporting obligations will linger.
ACA taxes: Repeals broad swath of fees and taxes including the PCORI tax, Health Insurance Tax, Medicare tax for high-income earners and others.
Health FSAs: Removes the current annual cap; would restore reimbursement for over-the-counter medications.
HSAs: Expands the limits for Health Savings Accounts.
Cadillac Tax: Postponed until 2026. Many plan sponsors will be relieved to note that Congress has, at least for the time being, chosen to pass on an opportunity to modify the current exclusion shielding employer-provided health coverage from federal tax liability. For details elaborating on what a change to the tax exclusion might mean for employers, please see the HUB International Client Bulletin at the following link:https://www.hubinternational.com/aca-directory/2017/03/congress-weighs-eliminating-tax-exclusion/
Individual mandate penalty: Penalty replaced with a 30% surcharge on premiums when individuals experience a break in coverage greater than 63 days within a 12-month period. (This change is designed to mitigate “opportunistic” buying of health coverage by consumers who choose to wait until they know they need health care services. Likely, this also heralds a return of the HIPAA-era creditable coverage certificates.)
Insurance marketplaces/exchanges: Modifies rating methodologies from a 3:1 to a 5:1 ratio; modifies the provision of subsidies to individuals in exchanges as of January 1, 2019 with funding contingent on age rather than household earnings.
Medicaid Expansion: Repeals expansion as of 2020; AHCA would also give states broad discretion to locally establish Medicaid eligibility criteria.
Market reform changes: Provides states discretion to define essential health benefits as of January 1, 2020 and allows for the creation of high-risk pools for individuals with chronic conditions. (Pre-existing condition exclusions would remain prohibited.)
As noted above, this is the first step of a long and arduous legislative process. Senate passage of H.R. 1628 is the next hurdle. However, using Senate rules governing budget processes (the same rules that Democrats relied on to pass the ACA back in 2010), Republicans will only require a simple majority vote to pass H.R. 1628 (50 votes). The GOP currently holds 52 seats in the Senate.
Until the AHCA becomes law, plan sponsors are encouraged to comply with the provisions of the ACA. We will continue to monitor and keep you up-to-date about all American Health Care Act (AHCA) and related developments.
