Last week – just as we were packing our bags for Vision San Francisco – House Republicans released their plans to repeal/replace the Affordable Care Act (ACA). The proposed legislation, announced March 6, doesn’t technically repeal or replace ACA in its entirety, but instead uses a congressional process called budget reconciliation to roll back ACA’s major taxes, penalties, and funding streams. These separate measures are on parallel tracks through two large House committees under the umbrella name of the American Health Care Act (AHCA). Progress is moving quickly; House Speaker Paul Ryan (R-Wis.) says he wants to have bills ready for the president’s signature before lawmakers head home for the Easter recess in April.
While elements of the proposals likely will change in the coming weeks as Congress debates the legislation, here are the top 5 things you need to know now:
- ACA’s most popular provisions aren’t going anywhere. AHCA keeps guaranteed coverage for adults up to age 26 on their parents’ health plans, covers people with pre-existing conditions, prohibits lifetime/annual benefit caps, and disallows health insurance discrimination based on age, gender, disability, and/or race.
- Employer mandates, taxes, and penalties are delayed or eliminated. If enacted, AHCA gives some financial and administrative relief to employers in the form of delaying the 40% Cadillac tax on high-cost plans until 2025, softening reporting requirements starting in 2019 for proof of offering coverage, and essentially eliminating the employer mandate to offer coverage at all by reducing the noncompliance penalty to $0.
- FSA and HSA balance limits will increase substantially. Under the new plan, beginning in 2018, employees may contribute up to the amount of their annual out-of-pocket limit in a health savings account (HSA), and spouses would also be able to make catch-up contributions to the same account. For flexible spending accounts, the bill would eliminate the $2,600 annual contribution limit and reinstate pre-ACA rules to let employers set limits (commonly $5,000 per year). Both proposals present administrative shifts for employers.
- A “continuous coverage” rule replaces the individual mandate. Similar to state laws that require residents to maintain consistent auto insurance with no gaps, the GOP plan mandates Americans to have continuous health insurance. If a coverage gap lasts longer than 63 days during the past year, insurers may charge individuals a 30% premium surcharge if/when they enroll in a new plan. People who age out of their parents’ coverage will have to prove they enrolled in the earliest open enrollment. Since most people receive coverage through work, employers likely will be leaned on to assist in enforcing this rule.
- Age-based tax credits replace income-based exchange subsidies. The Republican plan keeps ACA’s insurance exchanges in place. However, rather than offer discounted coverage to people who aren’t offered coverage at work and/or can’t afford to buy insurance on their own – like ACA does – the new GOP plan gives tax credits to these individuals based on age and family size, not income. The credits also don’t account for geographic differences in the cost of a plan. Again, the government likely will look to employers for compliance assistance in checking that people claiming the credits truly weren’t covered at work.
Stay tuned to the Businessolver blog for continued updates as the legislation progresses.