April 17, 2017 | Benefits Management | Posted by Bob Greene, Senior HR Industry Analyst at Ascentis
The Current State of the Affordable Care Act
On March 8, 2017, Congress and the President introduced H.R. 1628, “The American Healthcare Act,” which would have repealed the ACA (Affordable Care Act) and replaced it with an entirely new federal healthcare system. Promoted as less regulation, the proposed law was defeated when its proponents chose not to bring it to a congressional floor vote on March 23. Most experts believe that this was just the first in a series of proposals and that the impetus to repeal, reform, replace or repair the ACA has only been slowed and certainly not extinguished. So understanding what this law proposed to do is important, and here’s what we know about it.
The Affordable Care Act's Uneven Impact on the Healthcare Industry
Perhaps the most startling aspect of the proposed law was its disparate impact on two of the main pillars of the healthcare insurance industry: the individual market and the employer-provided benefits market. It is not an overstatement to say that the new individual market under this law would have looked nothing like the ACA version, while employer-provided benefits would have changed much less.
- Individual mandate: would have been repealed. Individuals would once again have been free to choose to forego health insurance. The penalty for this choice, which under the ACA came in the form of an annual tax bill of $695 to $2,085, was to be replaced by a 30% increase in insurance premiums if and when the individual eventually did purchase health insurance.
- Employer mandate: would have been repealed, including all the tax penalties (known as the §§ 6055 and 6056 penalties) imposed by the ACA on applicable large employers failing to offer health coverage to their workers.
- Pre-Existing Conditions Exclusion Elimination; Lifetime and Annual Benefit Caps; and Dependents Remain on Parents’ Policies to Age 26: would have been preserved.
- Medicare “Surtax”: which was imposed by the ACA on individuals earning above $200,000 or couples earning above $250,000 would have been repealed. Last-minute negotiations ranged from moving the surtax repeal up to a retroactive effective date of Jan. 1, 2017, to the other end of this spectrum -- leaving the surtax in place.
- “Cadillac” Tax: would have been preserved, but delayed from 2020 to 2025. It imposes a 40% excise tax on employers offering healthcare plans that cost more than $10,200 for individuals or $27,500 for families.
- Forms 1094/1095 reporting: still in effect. As counter-intuitive as it may have been in the context of the proposal to repeal the employer and individual mandates, a specific reference to repealing employer annual reporting has not yet appeared in writing. And it is worthy of note that the executive order signed the day President Trump took office, and designed to minimize the administrative burdens imposed by the ACA, is directed at “individuals, families, healthcare providers, health insurers, patients, makers of medical devices…” – in other words, just about every entity impacted by the ACA except employers.
- Minimum Essential Coverage/Minimum Value: unclear. While the inclusion of the ten “essential health benefits” and 60% minimum actuarial value that were so fundamental to the ACA were initially protected in the new proposal as well, last-minute negotiations with some factions in Congress, just before the vote would have been taken, included the revocation of these provisions as well.
These changes would likely have applied to employer-provided health benefits as well.
- Health Savings Accounts: expansion of these accounts was a prominent goal of the new bill, and the proposed limits on tax-exempt contributions to these accounts would have increased from $3,400 in 2017 to $6,550 in 2018 for individuals, and from $6,750 in 2017 to $13,100 in 2018 for families.
- The official CBO (Congressional Budget Office) scoring of the proposed law was not favorable. The CBO estimated that the law would have saved $337 billion over a decade, but would have also increased the number of uninsured in America by approximately 24 million people over the same period.
The bill as revised just before the vote on it was scheduled and then canceled (i.e., incorporating the so-called “manager’s amendments”), according to the CBO, would have cut the deficit reduction from $337 billion to $150 billion in this same time period, while leaving the 24-million-person increase in the uninsured intact.
What Might Happen Next with the Affordable Care Act
With multiple large associations from all across the political spectrum panning the bill (AARP, AMA, the American College of Physicians, the American Hospital Association, the Cato Institute, Heritage Action, the Center for American Progress, and dozens of others) and with the more conservative House members also steadfast against it, what compromises might we see?
- Capping Employer Tax-Deductibility: There’s been a lot of talk in Washington about the inherent “unfairness” of the “tax-free” provision of employer-provided benefits to employees, and as a result, many on Capitol Hill are in favor of capping that provision. The leading proposal that appears to have fallen short of inclusion at this time was capping employer tax-deductibility of health premiums at $8,000 for individuals and $20,000 for family coverage. Could this provision re-surface as a response to conservative push-back on the huge net cost of the proposed bill?
- Purchasing Insurance Across State Lines: This very popular talking point in Washington couldn’t be included in the proposed bill because without a direct impact on the federal budget, the Senate technically could not address it via the reconciliation process. So to avoid an assured filibuster in the Senate, it’s widely considered to be a “later phase” provision to activate. Whether that will be by further legislation or administrative fiat by the Secretary of HHS remains to be seen.
While the outcome of repealing and replacing the law as it stands remains uncertain, one area of the law we know will stay in effect is the reporting and filing of Forms 1094-C and 1095-C for tax year 2017.
We are dedicated to providing clear guidance and workable solutions with our HCM software portfolio. Ascentis provides solutions and support to help companies comply with the new laws while anticipating their potentially disruptive impact on data gathering and reporting requirements. If you're looking for a HCM solution that will help you manage the speed and curves of ever-changing Affordable Care Act (ACA) legislation, contact Ascentis today!
Bob Greene currently serves as Senior HR Industry Analyst at Ascentis. Bob’s 40 years in the human capital management industry have been spent in practitioner, consultant and vendor/partner roles. As practitioner, he managed payroll for a 5,000-person bank in New Jersey. As consultant, he spent 8 years advising customers in HRMS, and payroll and benefits system design as well as acquisition strategies. Bob also built a strategic HCM advisory practice for Xcelicor (later acquired by Deloitte Consulting.)