UPDATE: Since this article was pubished, House Republican leaders pulled their legislation to repeal the Affordable Care Act from consideration on the House floor Friday afternoon. PLANSPONSOR will continue to monitor the progress of any health care legislation going forward.
“Nothing in the proposed [American Health Care Act] will increase administrative burdens and costs for employers,” says Steve Wojcik, vice president, public policy at the National Business Group on Health (NBGH), who is based in Washington, D.C.
In fact, a survey of NBGH members found the excise tax on high-cost health plans (Cadillac tax) and the employer and individual mandates were the biggest provisions of the Affordable Care Act (ACA) employers were strongly in favor of repealing and would affect them the most. The American Health Care Act (AHCA), in its amended form, would delay the Cadillac tax until 2026 and repeal the ACA’s individual and employer mandates effective after December 31, 2015.
According to an article by an attorney at the Proskauer law firm, the AHCA does this by “zeroing-out” the penalties for not having minimum essential coverage (individual mandate) or for not offering adequate minimum essential coverage to full-time employees (employer mandate).
Wojcik says NBGH surveys show most employers would not change benefits if the employer mandate was repealed, but sectors such as retail, hospitality and entertainment would adjust who is covered and what type of coverage. “In the past, since paychecks were not big for employees in these sectors, employers may have offered slimmed down benefits. This trend may come back so employees will have affordable benefits,” he says.
A client update by Segal Consulting, says the individual mandate would be replaced by a new continuous coverage requirement under which, beginning in 2019, individuals would pay a 30% premium surcharge if they have a coverage gap of more than 63 days during a 12-month look-back period. The surcharge would last for the entire plan year and would take effect in 2018 for mid-year enrollments.NEXT: Reporting requirements and other provisions
While Wojcik says a lot of tracking and reporting administrative burdens will be reduced by the repeal of employer and individual mandates, Paul Hamburger, co-chair of the Employee Benefits & Executive Compensation Group and head of the Washington, D.C. office at Proskauer, says the law does not eliminate reporting such as W-2 value reporting and 1095 reporting. “The new law will require some reporting, but expect modifications. There will be a level of some reporting because the proposal will provide for tax credits for individuals. Individuals can’t take advantage of the tax credits if they have employer coverage,” Hamburger notes. “So reporting will be required so the government will know if employer has made coverage available. There will still be some reporting and reporting penalties.”
Under the proposed law individuals would get an advanced tax credit to help pay for individual insurance market premiums. The amount of the credit would be based on age and would be available only to individuals with incomes less than $75,000 (individual) or $150,000 (jointly with a spouse). Wojcik says exchange coverage would continue for next three years under the law.
The AHCA also modifies the tax rules related to health flexible spending accounts (HFSAs) and health savings accounts (HSAs). The law would remove the annual contribution cap on HFSAs. Additionally, HFSAs and HSAs would now be able to reimburse on a non-taxable basis over-the-counter medication without a prescription. The annual contribution limit to HSAs would be increased to $6,550 (individual) and $13,100 (family). Spouses would both be able to make catch-up contributions to the same HSA.
Wojcik says relaxing restrictions on savings accounts was also widely supported by employers the NBGH surveyed.
The Congressional Budget Office (CBO) projects, in the short term, health insurance premiums in the individual market would increase 15% to 20% if the bill is passed and 14 million fewer Americans will have coverage as soon as next year. A survey at the Society for Human Resource Management's 2017 Employment Law & Legislative Conference found the top concern for employers if the bill is passed was that a rise in the number of uninsured will lead to cost shifting by providers to employer-sponsored plans.NEXT: Why no vote on the bill
According to news reports, House Speaker Paul Ryan and President Donald Trump spent much of the day Thursday trying to sway Republicans who either said they would vote ‘no’ on the bill or were undecided. The bill needs 216 votes to pass, and with no Democrats supporting the bill, it is imperative to get enough votes from Republicans.
A New York Times scorecard showed 30 declared ‘no’ votes remain in the Republican camp, while 14 are leaning ‘no’ and another 33 are undecided or unclear.
Major hold-outs include members of the conservative House Freedom Caucus who say the proposed bill retains too many elements of the ACA, news reports say.
According to Proskauer, the ACA market reforms and patient protections that would remain in place include:
- The requirement to cover dependent children through age 25;
- The prohibition on waiting periods in excess of 90 days;
- The requirement to cover essential health benefits (individual and small group market plans only);
- The prohibition against lifetime or annual dollar limits on essential health benefits;
- The annual cap on out-of-pocket expenditures on essential health benefits;
- Uniform coverage of emergency room services for in-network and out-of-network visits;
- Required first-dollar coverage of preventive health services;
- The prohibition of preexisting condition exclusions;
- Enhanced claims and appeals provisions; and
- Provider nondiscrimination.
The Freedom Caucus is especially concerned with provisions regarding essential health benefits.
Hamburger reminds employers that they still have to comply with the current law. He says if the proposed bill does not go through, it is reasonable to assume reiterations will do what they can to relieve burdens on employers. In addition, he says, there may be opportunities for employers to work with the government to propose regulatory solutions that will be helpful.Wojcik concludes that employers should just monitor and watch the progress of health care legislation, He believes, for the most part, reform will be an upside for employers.
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