United States: American Health Care Act: Considerations For Employers


On Monday March 6, 2017, the House Republican leadership in the Energy and Commerce and Ways and Means Committees unveiled their signature bill to "repeal and replace" the Affordable Care Act (ACA). The "American Health Care Act" (AHCA) is an effort to make good on President Trump's promise to dismantle the ACA. Democrats are united in their opposition to the AHCA and other stakeholders have also come out against the bill – while the proposed legislation is subject to modification as it is marked up in committee and debated in Congress, certain provisions of the AHCA, if enacted, will be of particular importance to employers and provide the framework for a strategic road map as employers plan and design future health care benefits for their employees. 

In Depth

On Monday March 6, 2017, the House Republican leadership in the Energy and Commerce and Ways and Means Committees unveiled their signature bill to "repeal and replace" the Affordable Care Act (ACA). The "American Health Care Act" (AHCA) is an effort to make good on President Trump's promise to dismantle the ACA. Democrats are united in their opposition to the AHCA and other stakeholders have also come out against the bill. While the proposed legislation is subject to modification as it is marked up in committee and debated in Congress, certain provisions of the AHCA, if enacted, will be of particular importance to employers and provide the framework for a strategic road map as employers plan and design future health care benefits for their employees.

The AHCA retains many of the ACA's market reforms popular with employees, such as elimination of pre-existing condition exclusions, coverage of adult dependent children up to the age of 26, capping out-of-pocket expenses, coverage of preventive care with no cost-sharing and elimination of annual and lifetime maximums on essential health benefits. These provisions of the ACA do not directly affect government revenue and cannot be modified through the budget reconciliation process. Secretary of the US Department of Health and Human Services Tom Price has indicated the Trump administration expects to introduce additional legislation in the coming months to address other non-budget related provisions of the ACA.

Employers will welcome many of the new proposed features of the AHCA, such as the elimination of employer penalties for failure to offer insurance to full-time employees and the delay of the Cadillac Tax. Other features of the proposed AHCA that will impact employers are summarized below.

  • The earlier Republican proposal to tax employer-provided health insurance over the 90th percentile of premiums is no longer a feature of the bill. This is a victory for employers who vigorously opposed any taxation of employer provided health care benefits. The bill also delays, but does not repeal, the effective date of the Cadillac Tax—the tax on employers who provide high cost health insurance—from 2020 to 2025. This is largely viewed as an attempt to keep a placeholder in the legislation for future taxation of health benefits either through the vehicle of a Cadillac Tax on employers or a tax on employees who are covered under employer-provided health insurance that exceeds certain limits.
  • The penalties under the individual and employer mandates under the ACA would be reduced to zero, retroactive to January 1, 2016. While this is a welcome development for employers, cumbersome employer reporting to both the Internal Revenue Service (IRS) and covered individuals would likely continue to be required. Reconciliation rules limit the ability of Congress to repeal the current reporting rules. However, if the current reporting scheme based on employer and individual mandates becomes redundant under a revised system of tax credits, the secretary of the Treasury can cease to enforce and modify current reporting requirements. Simplified reporting of an offer of coverage on the W-2 by employers is under consideration.
  • Government subsidies in the form of premium subsidies and cost-sharing reduction for individuals who purchase coverage on the public Health Market Place Exchange (Marketplace Exchange) would apply to coverage sold outside of the Marketplace Exchanges and to catastrophic coverage, but will be eliminated by 2020. The premium subsidies would be replaced with new health tax credits that could be used by individuals to purchase coverage on the individual market, provided they are not covered under employer sponsored insurance or other forms of governmental health care plans. The credits would be based on age with credits beginning at $2,000 for individuals under age 30 and gradually doubling for individuals over age 60. The credits are additive for a family and capped at $14,000 and grow over time by CPI+1. The credits would be available in full to those making $75,000 per year or less ($150,000 for joint filers). The credit would phase out by $100 for every $1,000 in income higher than those thresholds. Conservative members of the House have criticized the refundable tax credits as a thinly disguised entitlement program threatening overall adoption of the AHCA.
  • It is anticipated that the elimination of the premium subsidies and cost-sharing reduction for purchase of Marketplace Exchange coverage, in combination with the elimination of the individual mandate, will be a death knell for the public Marketplace Exchanges. The Republican leadership is hoping to replace the public Marketplace Exchanges with free market choice to purchase qualifying health coverage in the individual market that will further the adoption of high deductible health plans compatible with Health Savings Accounts (HSAs). To this end, the AHCA contains a number of proposals designed to expand the adoption of HSAs. The maximum contribution to HSAs would double increasing the maximum contribution limit under HSAs to the out-of-pocket maximums (OOP max) under high deductible health plans (for 2017, the single OOP max is $6,550 and the family OOP max is $13,100).  Other changes to HSAs in the bill include rolling back the tax for HSA distributions not used for qualified medical expenses to 10 percent. Pre-ACA the tax was 10 percent, but was increased to 20 percent under the ACA. In addition, spouses who are HSA account holders would both be able to take advantage of catch-up contributions to one HSA. Also, effective in 2018, HSA withdrawals can be used to pay qualified medical expenses incurred before the HSA was established. If an HSA is established during the 60-day period beginning on the date that an individual's coverage under a high deductible health plan begins, then the HSA is treated as having been established on the date coverage under the high deductible health plan begins for purposes of determining if an expense incurred is a qualified medical expense.
  • The following taxes would also be repealed under the proposed legislation as of the end of 2017: the medical device tax, the 3.8 percent tax on net investment income for certain individuals, the tax on over the counter medicines; the annual fee on certain health insurance issuers; and the Medicare tax increase on high wage earner.
  • Limits on health Flexible Spending Accounts (FSAs) that were introduced under the ACA would be repealed essentially removing the $2,500 cap (indexed) on contributions to such accounts.
  • Deductibility of company provided Medicare Part D subsidies would be reinstated.
  • In an effort to encourage healthier individuals to remain enrolled in the health insurance markets, individuals would be required to pay a 30 percent higher premium in the individual market for health insurance if they have a gap in coverage of more than 63 days and later decide to re-enroll. This continuation of coverage requirement is similar to pre-ACA rules that governed the imposition of pre-existing condition exclusions under the Health Insurance Portability and Accountability Act, but it remains to be seen if they are enough of an incentive to encourage health individuals to remain in the insurance markets.  
  • Pre-ACA medical-expense deductions exceeding 7.5 percent of a taxpayer's adjusted gross income (AGI) would be reinstated, versus the 10 percent limit imposed under the ACA. This change would be effective beginning in 2018. The special 7.5 percent of AGI rule for taxpayers who are 65 years or older, or turned 65 during the tax year, would be extended through 2017.
  • For health insurance employers, the ACA capped company deductions for compensation paid to an officer, director or employee at $500,000. Under the AHCA, the limit on the deduction of compensation for such companies would be repealed effective in 2018.
  • Medicaid expansion would be repealed by 2020 and replaced with state block grants based on the number of Medicaid enrollees in the state. While the bill proposes an increase in payments to the states, the percentage increase is fixed and not pegged to increases in health care costs. The Medicaid proposals under the AHCA remain controversial as they would drastically alter the landscape for Medicaid funding and provider reimbursement. Under the proposal, Medicaid block grants would drastically cut federal funding for state Medicaid programs. As a result, states would either need to increase their funding of Medicaid programs, or cut Medicaid programs to adjust for the reduced federal funds. Cutbacks may involve reduced eligibility, coverage of fewer services, lower payments to providers (which are already lower than commercial insurance) or increased cost-sharing by participants. Doctors and hospitals that serve the Medicaid population will suffer from lower reimbursement, which may lead to fewer providers for this population. Both red and blue states may also be forced to increase taxes to bridge the budget gaps.

We plan to continue to educate our clients on the AHCA and other health care reform proposals as they evolve and anticipate further changes as regulators, industry groups and the public weigh in with their ideas and concerns over these proposed changes to the health care system.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.