On May 4, 2017, the U.S. House of Representatives passed legislation to repeal and replace the Affordable Care Act (ACA). An earlier version of the House bill, called the American Health Care Act (AHCA), had been debated in March but was not voted on due to opposition from Democrats and insufficient support from Republicans. This time, after revisions were made regarding Medicaid funding, coverage of pre-existing conditions, and insurance market reforms, the bill squeaked through on a 217-213 vote.
The House vote was held without waiting for the Congressional Budget Office (CBO) to score the cost and impact of the bill. The AHCA now moves to the Senate for consideration, which will require CBO scoring. The bill’s fate in the Senate is far from certain. Without support from at least 50 of the 52 Senate Republicans, the bill will fail. At this time, at least five Senators have given public statements expressing doubts on the House version of the bill.]
The primary focus of the AHCA is on funding for Medicaid and other state programs, maintaining stability in the individual insurance markets, and giving individual states more flexibility in opting out of insurance reforms. Also included are a number of provisions offering relief to employers and reducing the scope of requirements on group health plans. Below are highlights of provisions of the most interest to employer groups:
- Employer Mandate: The proposed legislation would repeal the ACA’s employer shared responsibility provision, that is the so-called “employer mandate” or “play or pay,” as of 2016. The rules for 2015 would not change, which would still be an issue for certain large employers that did not qualify for transition relief that year.
- Employer Reporting: The existing rules requiring completion of Forms 1094 and 1095 would continue to apply, although the IRS may have the ability to soften them in the future.
- Taxes and Fees: The Cadillac tax on high-cost health plans would be delayed six years, then take effect in 2026. The PCORI fee would continue as previously scheduled for plan years through September 2019. The additional Medicare tax on high earners would be repealed starting in 2023.
- Health Plan Requirements: Current ACA rules regarding eligibility for children to age 26, limits on waiting periods, prohibitions against annual or lifetime dollar limits, and most other provisions would continue unchanged. Coverage for pre-existing conditions also would be protected, at least for persons that maintained continuous coverage.
- Essential Health Benefits (EHBs): The ACA currently requires broad coverage of all EHBs in the small group insurance market (unless grandfathered or grandmothered). The AHCA would give individual states more flexibility in defining EHBs and determining coverage requirements.
- Health Savings Accounts (HSAs): The annual HSA contribution limits would be increased significantly.
- Health Flexible Spending Accounts (HFSAs): ACA restrictions regarding over-the-counter medications and the annual benefit cap would be repealed.
The proposed AHCA includes many provisions that most employers would welcome as good news, such as relief from the employer mandate, repeal of various health plan fees and taxes, and fewer restrictions on group insurance and benefit plan designs. Those provisions, however, are part of a large piece of legislation that is not likely to pass the Senate without significant modification. Therefore, for now, nothing has changed and employers are advised to continue complying with current law.
See our section-by-section summary of the bill passed by the House.
We will continue to monitor and report on developments as the Senate begins considering the House bill or proposes a bill of its own. Proposals, debates, changes, and compromises are expected to go on for weeks or months.