Health reform is back in the news for multiple reasons. The U.S. House of Representatives passed the American Health Care Act (AHCA) (H.R. 1628) by a vote of 217 to 213.  This law was prepared specifically to avoid a filibuster in the Senate by using the same budget reconciliation methodology used to pass the ACA.  In this way, a simple majority in the Senate can pass the law.  

So how would the law impact employers?   Things that are not expected to change include:

·       The requirement for individual and group plans to cover preventive benefits, such as contraception and cancer screenings, with no cost sharing

·       The prohibition on pre-existing conditions exclusions, including for pregnancy, prior C- section, and history of domestic violence although it increases pricing for those who have them

·       The requirement to provide dependent coverage for children up to age 26 for all individual and group policies

·       Any wellness incentives permitted under the ACA

·       Small Business Health Reimbursement Arrangements (HRAs)

·       Business reporting of employees with healthcare – but it will be more simplified than current 1094/1095 reporting

But a number of things would change.  First, the AHCA effectively repeals both the employer and the individual mandate by reducing the penalties imposed under the provisions to zero beginning in tax year 2016.  Hence, businesses would not have to offer healthcare to FTE employees or be subject to dollar amount penalties.  

Also, for small businesses, beginning in 2020, they would no longer be able to claim the small business tax credit.

The Cadillac Tax will be delayed until 2025.  A 40% excise tax would have otherwise been assessed beginning in 2018, on the cost of coverage for health plans that exceed a certain annual limit ($10,200 for individual coverage and $27,500 for self and spouse or family coverage). Health insurance issuers and sponsors of self-funded group health plans must pay the tax of 40% percent of any dollar amount beyond the caps that is considered "excess" health spending.  This tax would have likely been passed down to the employer and employee, increasing the cost of healthcare to the organization.

Although the ACA requirement to cover 10 essential health benefit categories will not be changed, starting in 2020, states will be able to apply for waivers to re-define essential health benefits for health insurance coverage offered in the individual or small group market.  Under the ACA, essential health benefits are defined to include the following general categories: ambulatory patient services, emergency services, hospitalization, maternity and newborn care, mental health and substance use disorder services (including behavioral health treatment), prescription drugs, rehabilitative and habilitative services and devices, laboratory services, preventive and wellness services, chronic disease management, and pediatric services (including oral and vision care).  The theory is that by reducing the number of essential health benefits (EHB), it would reduce the overall pricing of the insurance making it more affordable.  Opponents of the ACA argue that the requirement for the essential health benefits drove up the cost of healthcare.  Employers that fall under the small group market would be potentially impacted.

Prohibition on lifetime and annual dollar limits is not changed; however, the prohibition applies to limits on essential health benefits, which can be changed under state waiver authority.  Annual limits are the total benefits an insurance company will pay in a year while an individual is enrolled in a particular health insurance plan.  Starting in 2014, the Affordable Care Act banned annual dollar limits.  If health coverage is changed, for example, and limits the number of EHBs, any cost for services outside of those benefits would not be subject to a ban.  For example, maternity care is an essential health benefit. However, EHB can be changed under state waiver authority.  Therefore, if maternity leave is taken off the EHB list by the state, the prohibition of lifetime and annual dollar limits would not apply.  For employers, they will not likely want that benefit to be taken away. Therefore, the cost of employer provided insurance would increase to cover the missing EHB and cap the out of pocket payments by the employee.

State exchanges continue, though premium tax credits can be used for eligible non-group policies regardless of whether they are sold through an exchange starting 2020. 

The AHCA also encourages Health Savings Account usage by increasing the maximum HSA contribution limit to $3,400 for self-only coverage and $6,750 for family coverage in 2017. These are pre-tax dollars.  The 2018 limit would be at least $6,550 for self-only coverage and $13,100 for family coverage.  It would allow both spouses to make catch-up contributions to the same HSA beginning in 2018.  It would allow HSA funds to cover expenses incurred the day the account owner’s high-deductible health plan (HDHP) went into effect, as long as the HSA was established within 60 days.  Further, HSAs could be used to pay for over-the-counter medications.

Flexible Spending Accounts (FSA) limitations would be lifted starting 2018.  Currently, FSA contributions cannot exceed a dollar limit ($2,600 for 2017).

Now that the bill is before the Senate, the body has vowed to rewrite the bill.  What the final bill will look like is unknown.  There are many moving parts, and there is a question among senators whether some of the provisions of the AHCA have taken it out of the budget reconciliation process.  ASE will be following the bill as it moves its way through the Senate.

Source:  Kaiser Foundation, Zane Benefits 5/9/17, CCH 5/17/17, CMS.gov, Health Affairs 9/12/13