United States: The Road To Further Reform: AHCA's Proposed Provisions

As you likely recall, on May 4, 2017, the U.S. House of Representatives passed the American Health Care Act (AHCA) by a vote of 217 to 213. After the bill was scored by the Congressional Budget Office (CBO), the Senate reviewed it as it prepares its own version of the bill. Although additional changes to the AHCA are highly probable, employers may want to familiarize themselves with the proposed provisions.

A brief history of the bill

The AHCA, in its original form, was released by House Republicans on Monday, March 6, and approved by the House Ways and Means Committee and Energy and Commerce Committee on March 9.

The CBO released its scoring of the AHCA on March 13, estimating the bill's fiscal and coverage impacts. In short, the agency projected that the AHCA would reduce federal deficits by $337 billion over the 2017 to 2026 period, with the bulk of the savings coming from reductions in outlays for Medicaid and the elimination of the ACA's subsidies for nongroup health insurance — such as the premium tax credit and cost-sharing reductions. But, over the same period, the CBO estimated that about 24 million people would be uninsured as compared to under the ACA. The number of uninsured would increase to 28 million, according to scoring by the CBO of the House version that passed.

A number of amendments were subsequently issued shortly thereafter, which made some substantive and technical changes to the bill and accelerated the effective date of a number of provisions. The CBO updated its report, which generally projected smaller savings over the next 10 years (down from $337 billion to $119 billion).

Another amendment was adopted by the House Committee on Rules early on March 24, which included a delay of the repeal of the 0.9% additional Medicare tax and a provision requiring states to establish their own "essential health benefits" standards in lieu of the existing ACA standards. The House was originally scheduled to vote on the bill that day, but the vote was canceled because of a lack of support. Although it had appeared that lawmakers were going to turn their efforts to tax reform, they returned to health care a short time later and made further AHCA changes to gain additional support.

Notably, in April, an amendment authored by Rep. Tom MacArthur (R-NJ) emerged. Under the MacArthur amendment, states could apply for a waiver from a number of key ACA market reforms, including essential health benefits and certain financial protections for high-risk individuals.

Two more amendments were introduced and adopted thereafter: 1) the Upton amendment, which would provide $8 billion in additional funding for individuals who, as a result of their state obtaining a waiver under the MacArthur amendment, would be subject to increased premiums, and 2) the Palmer-Schweikert amendment, which would create a $15 billion "risk-sharing program" to help states lower premiums.

Provisions to be eliminated

The AHCA, as amended, would repeal most of the ACA's tax provisions, including:

  • The individual mandate penalties, retroactively effective beginning in 2016,
  • The employer shared responsibility penalties (otherwise known as the "employer mandate" or "play or pay"), retroactively effective beginning in 2016,
  • The premium tax credit under IRC Section 36B, effective in 2020 (and modified pending its repeal),
  • The 3.8% net investment income tax,
  • The 0.9% additional Medicare tax, effective in 2023,
  • The small employer health insurance credit, effective in 2020,
  • The limitation on health Flexible Spending Account (FSA) contributions,
  • The exclusion from "qualified medical expenses" of over-the-counter medications for purposes of Health Savings Accounts (HSAs), Archer Medical Savings Accounts (Archer MSAs), health FSAs and Health Reimbursement Arrangements (HRAs),
  • The annual fee imposed on branded prescription drug sales, and
  • The ACA's increase to the additional tax on HSAs and Archer MSAs for distributions not used for qualified medical expenses, reducing the percentages from 20% to 10% and 15%, respectively.

Except as otherwise noted, the repeal would go into effect in 2017. (The due dates in the original bill were largely accelerated.) Importantly, however, the "Cadillac tax" on high-cost employer-sponsored health plans wouldn't be repealed but would be delayed until 2026.

Possible new provisions

The main tax feature of the AHCA would be a new refundable tax credit for health insurance. The bill would also make a number of significant changes to strengthen HSAs in addition to those described above, as well as reduce the "floor" for deductible medical expenses. Here are some highlights:

Health insurance coverage credit. The AHCA would create a new refundable tax credit for health insurance coverage equal to the lesser of:

  • The sum of the applicable monthly credit amounts (see "Monthly credit amount" below), or
  • The amount paid by the taxpayer for a "qualified health plan" for the taxpayer and qualifying family members.

Monthly credit amount. During any tax year, the monthly credit amount with respect to any individual for any "eligible coverage month" (generally, a month when the individual is covered by a "qualified health plan" and ineligible for "other specified coverage") would be 1/12 of:

  • $2,000 for an individual who's under age 30 as of the beginning of the tax year,
  • $2,500 for an individual age 30-39,
  • $3,000 for an individual age 40-49,
  • $3,500 for an individual age 50-59, or
  • $4,000 for an individual age 60 and older.

Income-based phaseout. The new health insurance coverage credit would phase out at higher income levels. Specifically, it would be reduced by 10% of the excess of the taxpayer's modified adjusted gross income (MAGI) for a tax year over $75,000 (double that for a joint return). The $75,000 amount, as well as the monthly credit amounts noted immediately above, would be adjusted for inflation.

Other limitations on the credit. The new health insurance coverage credit would also be subject to a $14,000 aggregate annual dollar limitation with respect to the taxpayer and his or her qualifying family members (generally meaning spouse, dependent and any child of the taxpayer who hasn't attained age 27). In addition, monthly credit amounts would be taken into account only with respect to the five oldest qualifying family individuals.

With limited exception, married couples would have to file jointly in order to receive a new health insurance coverage credit. No credit would be allowed with respect to any individual who's a dependent of another taxpayer for a tax year beginning in the calendar year in which such individual's tax year begins.

Coordination between the credit and other rules. The AHCA would provide special rules for, among other things, coordinating the new health insurance coverage credit with the medical expense deduction. In addition, there would be rules for calculating the credit where the taxpayer (or any qualifying family member) has a "qualified small employer health reimbursement arrangement."

Advance credit payments. The AHCA would direct a number of agency heads to establish an advance payment program for individuals covered under qualified health plans.

HSA reforms

Effective beginning in 2018, the AHCA would make a number of changes intended to strengthen and enhance HSAs. These include:

Increased contribution limits. The bill would increase the maximum HSA contribution limits to equal the sum of the amounts of the high-deductible health plan deductible and out-of-pocket limitation. The HSA limits are currently $2,250 as adjusted for inflation ($3,400 for 2017) for self-only coverage and $4,500 as adjusted for inflation ($6,750 for 2017) for family coverage. Under the AHCA, they would be at least $6,650 for self-only and $13,100 for family coverage beginning in 2018 ("at least" because these amounts will likely increase because of inflation adjustments by 2018).

Catch-up contributions by both spouses. The AHCA would allow both spouses to make catch-up contributions to the same HSA.

Pre-HSA medical expenses. The bill would provide a special rule under which, if an HSA is established within 60 days of the date that certain medical expenses are incurred, it would be treated as having been in place for purposes of determining whether the expense is a "qualifying medical expense."

Lower floor for medical expense deduction. The AHCA would provide a 5.8% floor for medical expense deductions. The ACA had raised the longstanding 7.5% floor to 10%, effective in 2013 for taxpayers under age 65 and in 2017 for taxpayers 65 or older.

Lengthy journey expected

Senate Majority leader Mitch McConnell (R-KY) has formed a 13-member working group that will "craft a plan to pass legislation to repeal and replace" the ACA. Presumably, it will do so by hammering out a version of the AHCA that it believes will pass and have no issue acquiring the President's signature.

But whether and when this will happen is hard to say. As of this writing, most participants in the process and observers are expecting this to be a journey of weeks, or even months. Work with your health care benefits advisor to keep up on the latest developments.

If you have questions about the AHCA's proposed provisions, please contact Ron Present, Partner and Health Care Industry Group Leader, at rpresent@bswllc.com or 314.983.1358.

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.

Similar Articles
Relevancy Powered by MondaqAI
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
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
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.


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.


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