Compliance, Employee Benefits

On Monday, March 6th the House of Representatives offered legislation designed to alter the existing Affordable Care Act.  The American Health Care ACT (AHCA) is written as two separate proposals, one dealing with programs and one dealing with the market as a way to change the existing law.  The overall proposal will be done using the budget reconciliation process.

After reading the proposal, here are some high-level highlights:

 Employer Plans

  • Employer Mandates: The Employer Mandate technically stays in place, but this draft reduces the penalties to $0 and would be retroactive to January 1, 2016.
  • Cadillac Tax: The Cadillac Tax remains in place, but the implementation date is pushed back to the year 2025. The scheduled levies/fees are not altered at this time.

Individual Market

  • Subsidies: The plan includes an end to the current individual market subsidies (advanced payments) and shifts to tax credits that apply to an individual’s annual tax filing. All new credits would be age-banded and income-based. Effective 1/1/2020.
  • Individual Mandate: The Individual Mandate technically stays in place, but the penalties are reduced to $0. This would be retroactive to January 1, 2016.

Overall Market Changes

  • Age Bands: Insurance carriers are allowed to change the age bands for pricing from a 3-to-1 maximum differential to 5-to-1 in the small employer market.
  • Essential Health Benefits: The requirement for health plans to include essential health benefits would sunset starting 1/1/2020.
  • FSA: A repeal of employee contribution caps applicable to flexible spending accounts. (The current cap is $2,600 per year)
  • HSA: A loosening of rules to health savings accounts are included. Most notable is a new annual limit designed to correlate to the maximum potential out-of-pocket exposure of a specific health insurance plan.
  • OTC Eligibility: Over-the-counter (OTC) medications would be eligible for FSA/HRA/HSA reimbursement funds. (Effective 1/1/2018)

Key Takeaway

It is important for us all to remember that this is a first draft and the bill will need to go through the normal scrutiny of the federal legislative process. It’s best to think of this proposal as a “first step” for Washington on the topic.  We will provide you with updates when major changes are made to the proposal or steps in the legislative process occur.

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