From the Employer Perspective…
As we reported last week, the U.S. House of Representatives has passed an amended version of the American Health Care Act (AHCA), which repeals and replaces significant portions of the Affordable Care Act (ACA). The bill came several weeks after House Speaker Paul Ryan pulled the AHCA from the floor because, at that time, it was short on votes to pass due to objections from more conservative House GOP members regarding the bill’s preservation of certain ACA provisions. While the legislation still has a long way to go before becoming law, we’re issuing this follow-up to our earlier HCRAlert! to provide additional details of the AHCA as it stands today.
For employers, the most significant change the AHCA makes to the ACA is to repeal the employer mandate penalties effective January 1, 2016. Other significant changes for employers are unlimited health care flexible spending accounts (HCFSAs) and enhancements to health savings accounts (HSAs).1 For individuals, the most significant changes include the repeal of the ACA’s Medicaid expansion and its premium subsidies and cost-sharing reductions for low-income individuals. Higher-income individuals would see relief from various ACA taxes and fees, including the 0.9% Medicare surtax beginning in 2023 and the 3.8% net investment income tax retroactive to the beginning of this year.
The AHCA has been amended several times since its introduction. There are two Manager’s amendments (containing Technical and Policy changes), the MacArthur amendment, and the Upton amendment.
The MacArthur amendment establishes a “Federal Invisible Risk-Sharing Program” and allows states to submit applications to the Secretary of Health and Human Services to modify certain ACA requirements, such as the essential health benefits (EHB) standard and age rating restrictions. States would also be permitted to waive the AHCA’s 30% premium surcharge for individuals who seek to re-enroll after failing to maintain continuous coverage, defined as a lapse of 63 days or more over the previous 12 months; however, insurers would be able to underwrite based on health status when there has been such a lapse (generally for up to 12 months). For employers, this may mean again having to issue certificates of creditable coverage. The Upton amendment would add an additional $8 billion to state risk pools, which are intended to help individuals with pre-existing conditions obtain coverage in states where community rating is not mandatory.
There was also a companion bill (H.R. 2192) that passed the House along with the AHCA, which eliminates the waiver option in the MacArthur amendment for members of Congress. The bill ensures that members of Congress and their staff are treated the same as other individuals in a state that receives a MacArthur amendment waiver.
Summary of Key Changes
The chart below summarizes some of the significant changes made by the AHCA.
|Affordable Care Act (ACA)||American Health Care Act (AHCA)|
Employer mandate on applicable large employers (ALEs)
|No individual or employer mandate effective retroactive to 1/1/16
Insurers can impose a 1- year 30% surcharge on consumers with a lapse in continuous coverage (individual and small group market)
|Assistance||Income-based premium subsidies that limit after-subsidy cost to a % of income|
Cost sharing reductions for out-of-pocket (OOP) expenses
|Age-based refundable premium tax credits, phases out at higher incomes
No cost sharing reductions for OOP expenses
ACA subsidies phased out after 2019; AHCA credits effective in 2020
|Medicaid||Matching federal funds to states for anyone who qualifies|
Expanded eligibility to 138% of poverty level income
|Federal funds granted to states on capped, per-capita basis as of 2020
States can choose to expand Medicaid eligibility, but would receive less federal support for those additional persons
|Premium Age Differences||3.1||5:1 (and the MacArthur amendment would allow a higher ratio|
|HSA limits||$3,400 / $6,750||Contribution limits increased to maximum HDHP OOP limit
$6,550 / $13,100 (retroactive to 1/1/17)
|"Cadillac Tax"||Tax on high-cost employer plans implemented in 2020||Tax on high-cost employer plans delayed until 2026|
|Other Taxes||3.8% tax on net investment income|
Limit on HCFSA contributions
Annual health insurance provider tax
OTC medication excluded as qualified medical expense
0.9% Medicare tax on income >$200K individual / >$250K family
|Repeal of these taxes retroactive to the beginning of 2017 (except for the repeal of the Medicare tax, which would begin in 2023)|
|Essential Health Benefits||Individual and small group plans required to offer ten categories of EHB||Under MacArthur amendment, state waiver option is available
Some Medicaid plans not required to offer mental health and substance abuse benefits
|No Change: No Pre-Existing Condition Exclusions, Coverage of Children to Age 26,
No Annual or Lifetime Dollar Limits on EHB
AHCA MacArthur Amendment
|AHCA MacArthur Amendment|
|Insurance Market Provisions||Reinstates EHB as federal standard (removes ability of states to define EHB, but see waiver option)
Maintains the following provisions of the AHCA:
--Prohibition on pre-existing condition exclusions
--Prohibition on discrimination based on gender
--Guaranteed availability and renewability of coverage
--Coverage of adult children to age 26
--Community rating rules (but see waiver option)
|Insurance Market Provisions||In the interest of lowering premiums and expanding number of enrollees, states may obtain waivers from:
EHB (states could set their own definition of EHB for the individual and small group markets starting in 2020, and increase the age rating ratio above 5:1 starting in 2018)
Community rating rules, except for the following categories, which are not waivable:
--Health status (unless the state has established a high-risk pool or is participating in a federal high risk pool)
|Limited Waiver Requirements||States must explain how the waiver will benefit the insurance market in their state, such as reducing average premiums, increasing enrollment, stabilizing premiums for individuals with pre-existing conditions, or increasing the choice of health plans. Applications are automatically approved within 60 days unless denied by HHS.|
AHCA has yet to be scored by the Congressional Budget Office. It will now go to the Senate where significant changes are expected in order to secure passage (and it is possible that it may not garner enough votes there to pass at all). In addition, it is not clear that as currently drafted it will meet the requirements to qualify for a simple majority vote under the Senate’s budget reconciliation rules. Provisions that have no budgetary impact may be removed and AHCA’s tax policies may be required to have sunset dates so that they do not increase deficits outside of the budget window (typically, 10 years). It may take months before any final legislation is passed and the AHCA may get stalled again as changes will have to go back to the House for approval. Employers and other stakeholders should stay the course on ACA compliance at this time. Trion will continue to monitor and update you as the AHCA continues to make its way through the legislative process.
Your Trion Strategic Account Managers are here to answer any questions you might have as you prepare to comply with upcoming ACA requirements. If you are not currently a Trion client and would like assistance navigating the changes required by health care reform, please contact us today by emailing MBGray@Trion.com 610-207-8985