March 10, 2017
On January 13, 2017, the United States House of Representatives passed a budget resolution to begin the process of repealing the Patient Protection and Affordable Care Act (PPACA) through reconciliation, a process that allows legislation to be passed with a simple majority in the Senate without a filibuster. The budget resolution outlined specific instructions for the House Ways and Means and Energy and Commerce Committees - the primary Committees with jurisdiction over health care - to draft legislative recommendations that the Budget Committee could compile into one reconciliation package.
These recommendations, referred to as the American Health Care Act (AHCA), were released on the evening of Monday, March 6. On March 9, the recommendations cleared the Ways and Means and Energy and Commerce Committees. The bill now heads to the House Budget Committee. The full House is expected to act on the bill prior to a spring break scheduled to begin on April 7.
The AHCA aims to repeal or modify many provisions of PPACA. Provisions with the most significant impact on employers and employees are highlighted below. In its current draft, the AHCA:
- Effectively eliminates the Individual and Employer Mandates by reducing the penalties to zero. This provision would be effective for months beginning after December 31, 2016, providing retroactive relief to individuals and employers impacted by the penalties in 2016.
- Creates an incentive for individuals to maintain continuous coverage. If an individual with coverage through the individual or small group market has a lapse in coverage of more than 63 days, insurance companies would assess a 30 percent late-enrollment surcharge on top of their premiums for 12 months.
- Delays the effective date of the 40 percent excise tax (the Cadillac Tax) on high cost employer-sponsored health coverage to 2025.
- Increases the basic limit on Health Savings Account (HSA) contributions to align with HSA out-of-pocket maximums. Thus, the basic limit will be at least $6,550 in the case of employee-only coverage and $13,100 in the case of family coverage beginning in 2018.
- Repeals many of PPACA’s taxes and fees, including the annual fee on health insurers (HIT tax), the medical device tax, the annual tax on branded pharmaceutical manufacturers, and the limits on health FSA contributions.
- Replaces PPACA’s income-based tax credits with advanceable and refundable tax credits for major medical insurance on the individual market and unsubsidized COBRA coverage. The credits are adjusted by age, ranging from $2,000 per year for individuals under age 30 to $4,000 per year for individuals over age 60. The tax credits are reduced once certain income thresholds are met, and are not available to individuals with access to government health insurance programs or employer-sponsored health coverage.
- Introduces new simplified reporting of an offer of coverage on the Form W-2 by employers and a new employer statement to disclose the eligibility of employees and dependents for employer-sponsored coverage and to assist with determination of availability of the new tax credit structure.
- Rolls back PPACA’s expansion of Medicaid effective January 2020. Enrollment in the Medicaid expansion would freeze in 2020 and states would no longer be allowed to sign new enrollees up for the program. Medicaid would then be converted to a per capita system, where states would get a lump sum from the federal government for each enrollee.
WHAT REMAINS OF THE ACA?
Although reconciliation provides a pathway to repeal and replace provisions of PPACA with fewer legislative barriers, a bill passed through budget reconciliation cannot accomplish a full-scale repeal of PPACA. Reconciliation rules limit the ability of Congress to repeal provisions of PPACA that do not impact the federal budget.
Thus, many of the most popular consumer protections of PPACA remain. The AHCA does not impact the requirement to cover dependent children to age 26, the prohibition on pre-existing condition exclusions, the prohibition on annual or lifetime dollar limits for Essential Health Benefits, and the requirement to cover preventive care without cost-sharing.
Notably, the AHCA does not repeal the Code 6055 and 6056 reporting requirements for insurers, self-funded health plans, and Applicable Large Employers (ALEs) subject to the Employer Mandate. However, it is anticipated that the Form W-2 simplified reporting requirement contained in the AHCA would replace the current reporting requirement for ALEs.
For more information about these and other provisions of the AHCA, please review the Healthcare Reform Update from Gallagher Benefit Services Compliance Counsel. It summarizes the provisions of PPACA that the AHCA seeks to repeal, modify, or delay. Gallagher Benefit Services and Hill, Chesson & Woody will continue to monitor developments on healthcare reform legislation and regulation and will provide you with relevant updated information as it becomes available.
Should you have any additional questions, please contact our office at (919) 403-1986.