On May 4 the US House of Representatives passed H.R. 1628, The American Health Care Act of 2017 (AHCA).
Passed through a budget reconciliation process (which only requires a bare majority but limits the provisions to items that impact the budget), the AHCA now goes on to the Senate, which is expected to significantly modify if not fully replace the AHCA with its own legislative language.
Highlights of the AHCA that are of significant interest to employers include the following:
- 2016 “zero out” of tax on individual and employer mandates
- 2017 repeal of over-the-counter drug prohibition, FSA dollar cap, HSA 20% penalty (reduced to 10%), device tax, health insurance tax, and nondeductibility of Medicare Part D reimbursement
- 2020 repeal of ACA premium credits, cost sharing, etc.
- 2023 repeal of the ACA Medicare tax increase
- 2026 delay of the Cadillac tax
Notably, the AHCA does not contain a cap on tax-free employer health insurance (but this could still occur in the Senate or in subsequent tax reform legislation).
The AHCA does not change the following:
- Age 26 coverage for adult children
- Essential Health Benefit (EHB) rules—unless a state seeks waiver in 2020 or beyond
- Reporting (it adds to it starting in 2020 and likely revives HIPAA creditable coverage reporting related to preexisting condition changes to House bill)
- Preventive care (note the May 4 executive order regarding religious freedom)
- Lifetime/annual dollar limits (unless benchmark state seeks EHB waiver)
While the AHCA is a long way away from being signed by US President Donald Trump, it may create 2017 planning opportunities related to:
- Increasing HFSA contributions
- Expanding permissible HRA/HFSA reimbursements to include over-the-counter drugs
And as employers begin to plan for 2018, the AHCA may lead them to:
- React to the practical repeal of employer and individual mandates by changing eligibility rules back to “traditional” full-time definitions
- Communicate higher HSA contribution limits
- Drop “least expensive” plan and/or abandon affordability-based premiums
- Abandon PEO contracting efforts focused on employer mandate
- Abandon EGWP and go back to traditional Retiree Part D subsidy (since it will again be deductible)
Morgan Lewis will keep employers updated as the legislative process to repeal and replace the Affordable Care Act plays out.