ACA Road to Repeal: The American Health Care Act
On March 6, House Republicans introduced the American Health Care Act (AHCA) The AHCA is the result of January's budget resolution (S.Con.Res.3) directing Congressional committees to draft reconciliation legislation to repeal spending-related aspects of the ACA. At the same time, since it's a reconciliation bill, it can only make changes that directly impact the federal budget, so it doesn't address many of the ACA's provisions. Although it is possible that changes will be made to the bill as it continues through the reconciliation process, it is useful to start assessing what would stay the same and what would change.
It's important to note that a reconciliation bill is filibuster-proof and only needs a simple majority to pass the Senate.
What Would Change
Although this situation is still extremely fluid, changes would certainly affect both individuals and employers. Here we look at how the American Health Care Act would impact employers directly:
- The employer mandate penalty and individual mandate penalty would be repealed, retroactively to the beginning of 2016. However, ACA employer reporting requirements would remain in place, since they can't be eliminated via reconciliation; the House Committee on Ways and Means notes that simplified W-2 reporting of an offer of coverage may become available in the future.
- As of 2018, health savings account (HSA) contribution limits would be increased to match annual out-of-pocket limits on HSA-qualified high-deductible health plans, and the FSA contribution limits (currently $2,600) would be eliminated at the end of 2017.
- The Cadillac tax would be delayed until 2025 — the American Health Care Act does not include a cap on the tax exclusion of health insurance benefits
- After 2017, an employer tax deduction for retiree prescription drug coverage would be allowed for the full amount, including the portion offset by federal retiree drug subsidy. Under the ACA, the subsidized portion can't be deducted.
- Individual and small group plans would be allowed to vary premiums for older vs. younger enrollees by a 5:1 ratio instead of the current 3:1.
- In place of the individual mandate, the American Health Care Act has a "continuous coverage" requirement. So starting after the 2018 individual market open enrollment period (currently proposed to end on Dec. 15, 2017, notes the Department of Health and Human Services), people who enroll following a gap in coverage of at least 63 days would be subject to a 30 percent premium increase for the duration of the plan year.
What Would Stay the Same
Many ACA consumer protections are left intact under the American Health Care Act:
- Young adults would still be able to remain on a parent's health insurance plan until age 26.
- Coverage in the individual market would continue to be guaranteed-issue regardless of medical history.
- Pre-existing condition waiting periods and exclusions would continue to be prohibited.
- Section 1557 non-discrimination rules would still apply.
- Limits on out-of-pocket costs would continue to apply.
- Lifetime and annual benefit limits would continue to be prohibited.
- Individual and small group plans will still have to cover the ACA's essential health benefits (but ACA "metal level" actuarial value designations for individual and small group plans will no longer be required as of 2020).
While the AHCA may change as it flows through the Congressional approval process, both President Trump and Speaker Ryan have made it abundantly clear that passage of the AHCA is their top priority.
As of March 16, the bill has cleared the Ways and Means and Energy and Commerce Committees, and is expected to land on the House floor by the end of March. But it's important to note that this does not mean that its approval in its current form is imminent. The Congressional Budget Office recently released a fiscal impact report which estimated that the proposal would cut 337 billion dollars from the federal budget, but could also increase the number of uninsured people by as much as 24 million by 2026.
This information makes predicting an accurate timeline for approval even murkier. There is pressure from both sides of the aisle to implement significant changes to this proposal before they bring it to a vote on the House floor.
As you work to understand what these possible changes could mean for your organization, take the time necessary to assess and verify that your organization has both the system capabilities and necessary available resources to be ready to pivot when necessary.
Although change is certainly coming, nothing is going to be altered overnight. In the meantime, the ACA and its reporting requirements remain in place. Employers should focus on completing their 2016 annual reporting including filing forms with the Internal Revenue Service and continue to monitor changes as Congress continues to debate the AHCA.
As the AHCA specifics become further clarified in the coming weeks, continue to look out for additional blogs and webinars to provide you with the practical implications to your organization.
See below for other articles in our "ACA: Road to Repeal" series:
ACA Road to Repeal: What Does Repeal and Replace Really Mean?
ACA Road to Repeal: Executive Order
ACA Road to Repeal: If the ACA Is on Its Way Out, What Comes Next?
ACA Road to Repeal: A State-Based Approach to ACA Replacement