- What Employers Need to Know About the American Health Care Act
- April 24, 2017 | Authors: Michelle Rood; Dale R. Vlasek; Gladys C. Zolna
- Law Firms: McDonald Hopkins LLC - Cleveland Office; McDonald Hopkins LLC - Chicago Office
- On Monday, March 6, House Republicans released the American Health Care Act, their long-awaited plan to repeal and replace the Affordable Care Act (ACA), more commonly known as “Obamacare.” While the goal for Republicans over the last eight years has been to repeal the ACA in its entirety, for the most part the new bill leaves much of the existing legislation in place.
The reason why stems from the rules for the process in which Republicans seek to pass the American Health Care Act: budget reconciliation. The advantage of passing the ACA repeal and replace legislation as a reconciliation bill is that only a simple Senate majority is required for passage (some may recall that parts of the ACA were enacted using the same mechanism). The downside to using budget reconciliation is that it must be revenue neutral, meaning that any reduction in the federal revenues (i.e., tax cuts) must be offset by reduction in credits or spending. Additionally, only legislation that is germane to the management of the budget is allowed to be passed using this fast-track method. This explains why the technical components of the ACA, such as its changes to the health care delivery system through quality initiatives and program integrity and the implementation of nondiscrimination provisions have been left in place, and why proposals to allow the sale of insurance across state lines are conspicuously missing.
Below are highlights of the major provisions affecting employer sponsored group health plans. For more information on the provisions affecting Medicaid funding and information for health care providers, please see our alert "What health care providers need to know about the American Health Care Act."
- Continues Coverage Requirements for Group Health Plans
- Repeal of the Medicare tax on High Income Earners
- Repeal of the Investment Tax on High Income Earners
- Repeal of the Individual and Employer Penalties (but not the mandates)
- Employer Reporting Requirements Remain
- Delay of the Cadillac Tax Implementation until 2025
- Expansion of Health Savings Accounts (HSA)
- Elimination of Flexible Spending Account (FSA) Limits
- IRC Section 105(h) Nondiscrimination Provisions Remain in Place
- Reinstatement of the business-expense deduction for retiree prescription drug costs
- Repeal of the ACA Small Business Tax Credit
We will be monitoring the progress of this bill as it makes its way through the reconciliation process. Since the bill has not yet been scored by the Congressional Budget Office (it has been reported that scoring will be released by March 13), it is likely that this draft bill will change.