United States: American Health Care Act – Key Takeaways For Employers And Plan Sponsors

On March 6, 2017, the House of Representatives' Ways and Means Committee and Energy and Commerce Committee released budget reconciliation recommendations that will, after mark-up beginning on March 8th, form the American Health Care Act (the "AHCA"). The AHCA is intended to be the law that "repeals and replaces" the Affordable Care Act ("ACA"). The Ways and Means Committee bill certainly repeals most of the taxes applied under the ACA and the Energy and Commerce Committee bill significantly alters Medicaid and how that program is funded. Nevertheless, the AHCA would retain a number of key ACA provisions, albeit modified in some respects.

The proposed AHCA has already faced strong opposition from members of both parties and, thus, it is likely that this legislation will either undergo revisions or be substituted with another bill. In any event, the draft AHCA, when read in conjunction with other recent attempts to repeal and replace the ACA, provides a roadmap of where Congress appears to be heading. Below are key takeaways that employers and plan sponsors should be aware of and a few things they should keep an eye on as things develop.

1. Individual and Employer Mandates

Like other efforts to repeal and replace the ACA, the AHCA would essentially repeal the ACA's individual and employer mandates effective after December 31, 2015. 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).

Instead of imposing a tax penalty on individuals who do not enroll in minimum essential coverage, the AHCA attempts to encourage individuals to have coverage by allowing insurance carriers to charge a 30% premium surcharge to those who fail to have continuous coverage (i.e., a break in coverage of 63 days or more would trigger the surcharge). Although the AHCA keeps in place the ACA's prohibition against preexisting condition exclusions, the 30% surcharge appears to be another means of discouraging people from waiting until they have a health issue to purchase coverage.

Outside of the effective repeal of the employer mandate, the AHCA's impact on group health plans appears to be minimal. However, if the 30% surcharge is part of the final legislation, it is likely that plan sponsors will be required to provide notices similar to the certificates of creditable coverage required in pre-ACA days.

2. Employer Reporting Obligations to Continue

Although the individual and employer mandates would be repealed, it is likely that the ACA reporting obligations (Forms 1094-B/C and 1095-B/C) will remain in place, at least in some forms. Until 2020, individuals will still be able to get premium credits when purchasing coverage on Marketplaces. Thus, the reporting requirement under Section 6055 of the Internal Revenue Code (the "Code") remains important. With the employer mandate repeal, reporting under Code Section 6056 seems less important, but it may nevertheless continue until 2020. After 2020, tax credits would be available under the AHCA, so the IRS would likely still need employers to report at least some information regarding coverage.

3. Cadillac Tax Repealed (but really just delayed)

Despite the AHCA provision "repealing" the so-called Cadillac Tax, the legislation merely delays the effective date of the tax until 2025. The Cadillac Tax was originally slated to be effective in 2018, but it was delayed until 2020 in prior budget legislation. Given that the AHCA is also budget reconciliation legislation, the newest delay may simply be a procedural step toward future repeal. Employers and plan sponsors should nevertheless keep the Cadillac Tax on their radars.

4. Many ACA-Related Taxes Repealed

The AHCA would repeal or modify, effective after December 31, 2017, numerous taxes created or modified by the ACA, some of which would have a direct or indirect impact on group health plans. For example, the branded prescription drug tax, medical device tax, and the health insurance tax would be repealed. The Medicare tax on investment income and the Medicare surcharge on high-earners would also be repealed. The annual contribution limitation on health flexible spending accounts ("HFSAs") would be removed. The penalty for ineligible distributions (those made before age 65 for non-medical expenses) under health savings accounts ("HSAs") would be reduced to 10%. The Retiree Drug Subsidy would again be deductible.

5. Popular ACA Reforms Remain

Because the AHCA is budget reconciliation legislation, only revenue-related portions of the ACA can be repealed or modified. Thus, various ACA market reforms and patient protections would remain in place. These 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.

6. Employee Tax Exclusion Remains Intact

Previous attempts to repeal and replace the ACA included revenue-generating provisions to pay for the repeal of the ACA-related taxes. In prior legislation, this would have been accomplished by eliminating or reducing the employer deduction for health benefit expenses or by capping the employee tax exclusion for the cost of coverage. The AHCA does not currently include a similar provision, but it is certainly possible that such a provision can be added as the AHCA is negotiated and revised.

7. HFSA/HSA Expansion

The AHCA also modifies the tax rules related to HFSAs and HSAs. As noted above, the AHCA 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.

8. New Tax Credit Scheme Could Cause Administrative Issues for Plan Sponsors

What appears to be one of the more politically controversial aspects of the AHCA is the new advanced tax credit scheme. At its core, the AHCA proposal is very similar to the premium tax credits available under the ACA – 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 income less than $75,000 (individual) or $150,000 (jointly with a spouse). The credit would be administered under the rules similar to the Health Coverage Tax Credit ("HCTC") (see our July 16, 2015 blog entry for more information on the HCTC).

Individuals enrolled in group health plans would not eligible for the tax credit, unless they are enrolled in COBRA coverage that is not subsidized by the employer. Importantly, in order to receive the credit, the coverage (whether individual market or COBRA) cannot cover services related to abortion (subject to certain exceptions).

This arrangement would likely create administrative headaches for plan sponsors and COBRA administrators. The new tax credit scheme appears to require monthly reporting by eligible coverage providers, so COBRA administrators would have to develop procedures to comply with this requirement. Employers sponsoring plans that cover abortion services will need to consider the impact that will have on COBRA qualified beneficiaries. Providing COBRA coverage that covers abortion will prevent a qualified beneficiary from getting a tax credit, but simply carving abortion coverage out from COBRA coverage is not likely a viable option because COBRA coverage must be identical to active employee coverage. Should this provision find its way to the final legislation, plan sponsors and COBRA administrators will need to work with counsel and other consultants to develop a compliance strategy.

Given the opposition the AHCA is facing, it is very likely that there will be changes to the legislation as it makes its way through Congress. We will continue to monitor legislative efforts and will provide updates as substantive developments occur.

American Health Care Act – Key Takeaways For Employers And Plan Sponsors

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.

Authors
Similar Articles
Relevancy Powered by MondaqAI
Grant Thornton LLP
Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Grant Thornton LLP
Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
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
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

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 or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq 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 of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions