All posts tagged repeal

What the Latest Version of the AHCA Would Mean for Employers

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The American Health Care Act that was passed by the House of Representatives by a small margin would repeal the employer mandate and the reporting requirements that the Affordable Care Act ushered in.

While Senate Republicans are likely to start from scratch and hammer out their own ACA replacement, for now, the only legislation in play is the controversial AHCA.

So, what’s in it for employers?

 

Eliminates the employer mandate – The ACA mandate requires that employers with 50 or more full-time or full-time-equivalent workers provide health insurance for their staff. The AHCA eliminates this requirement. This will likely not have a significant impact on a large number of organizations since they offer benefits to better compete for talent.

 

Delays the “Cadillac tax” again – Congress has already voted once to delay the implementation of an annual 40% excise tax on plans with annual premiums exceeding $10,800 for individuals or $29,500 for a family. The tax is slated to take effect in 2020, but the AHCA delays that to 2026. While the tax is supposed to be paid by insurers, it’s anticipated that they would pass it on to employers.

 

Changes tack on essential benefits – The ACA also requires that all health plans provide 10 essential benefits, including doctors’ services, inpatient and outpatient hospital care, and prescription drug coverage. The AHCA would allow states to have the final say in what health insurance plans should include.

That said, the bill would seem to allow national employers to opt out of essential benefits and offer stripped down plans that would likely be less expensive for employers and their covered workers, but also offer fewer benefits.

 

Expands health savings accounts

The measure would also greatly increase the amount of cash an individual can set aside pre-tax into their HSA. The current maximum an individual can put into an HSA is $3,400, but under the AHCA that would be increased to $6,550. For families, the HSA maximum would jump to $13,100 from the current $6,550.

The AHCA removes the cap on flexible savings accounts as well, which was set at $2,600 under the ACA.

These two changes would benefit employees who take advantage of these health care savings vehicles.

 

The takeaway
The AHCA does much more than the above, but most of the rest of the legislation is really geared toward the individual market and also tries to deal with the issue of pre-existing conditions.

The AHCA would also:

  • Eliminate the tax penalty for individuals who fail to secure coverage.
  • End funding for Medicaid expansion.
  • Replace the ACA’s cost-sharing subsidies, which are based mostly on consumers’ incomes and premium costs, with tax credits that increase for older individuals.
  • Repeal taxes on the wealthy, insurers, and drug and medical device makers.

 

To be clear, this legislation is not the end game. House Republicans were able to pass the legislation by a razor-thin margin after much wrangling, a feat that will be difficult to repeat in the Senate.

Also, it seems likely that Senate Republicans will start from scratch with their own legislation and that the AHCA may never see the light of day in the Senate.

Political stakes are also higher for senators and the GOP holds a slight 52-48 majority in the upper house. It would only take a few defectors to sink any attempt at repealing the ACA.

 

ACA Repeal Plan Is Dead; So What Should You Do?

A blank tombstone against a sky with fluffy clouds..

Now that the American Health Care Act has suffered a defeat in Congress and President Trump has said he’ll move on to other matters, the Affordable Care Act will stand as the law of the land.

The big question hanging over the law, however, is the executive order that Trump signed shortly after taking office in January. While that order did not abolish the legislation, it set the stage for agencies to act immediately on regulations that are deemed overly burdensome.

However, the administration has not indicated what it will do now that the AHCA has ground to a halt.

While the executive order still stands, it’s now abundantly clear that the ACA will not be repealed this year, but what’s not certain is how the agencies will enforce the law’s regulations.

They can choose, for example, not to enforce the penalties for applicable large employers who do not provide acceptable health insurance for their employees, or to enforce the penalties for individuals that do not secure health insurance if none is offered by their employer.

There are two main agencies that have enabling regulations in place for the ACA: the

Department of Treasury and the Department of Health and Human Services (HHS). There has been no indication or announcement from these agencies that they will or will not enforce the regulations currently in place or whether they are in the process of starting to write new ones.

Regardless, whatever they chose to do, rule-making takes time… often years. In fact, the regulations that enabled the ACA took four years to unfold as the agencies were busy writing them and putting them out for public comment.

And any rules would still have to be changed within the confines of the ACA, and it’s unclear how much leeway the agencies have in deviating from that law.

The executive order reads:

“…it is imperative for the executive branch to ensure that the law is being efficiently implemented, take all actions consistent with law to minimize the unwarranted economic and regulatory burdens of the Act, and prepare to afford the States more flexibility and control to create a more free and open healthcare market.”

It also said that the HHS secretary and other agency heads “shall exercise all authority and discretion available to them to waive, defer, grant exemptions from, or delay the implementation of any provision… that would impose a fiscal burden on any State or a cost, fee, tax, penalty, or regulatory burden on individuals, families, healthcare providers, health insurers, patients, recipients of healthcare services, purchasers of health insurance, or makers of medical devices, products, or medications.”

Meanwhile, Trump has expressed willingness to work with the Democrats to get a new law pushed through, but the chances of that are slim if he insists on repealing the ACA. They are more likely to be open to changes to address some of the problems with the law, particularly the lack of participation by private insurers in health exchanges in some parts of the country.

 

The takeaway
So what does this mean for you, an employer? It means you should continue providing insurance for your employees if you are an applicable large employer, and continue submitting the required forms to the IRS.

For now, do what you’ve been doing.

 

GOP Releases Legislation to Gut and Replace ACA

House Republicans have filed legislation that would repeal most of the Affordable Care Act, including measures to eliminate the employer and individual mandates.

But from the get-go the legislation – backed by the House leadership – was panned by the GOP’s conservative wing, which said it doesn’t go far enough to completely get rid of the ACA, casting doubt on the prospects of it getting passed.

And Congressional Democrats immediately voiced their absolute opposition to the bill, vowing to vote ‘No’ on the legislation.

While passage in the House would be a bit easier, the slim 51-49 vote edge that Republicans hold in the Senate means it’s unclear whether the bill can pass in its present form.

But for now, this is the only piece of viable legislation that’s been floated to gut the ACA, and replace it with a scaled-down version.

The leadership is mindful that they cannot do an outright repeal, since it would affect some 20 million people who have been able to secure health insurance under the ACA.

The bill, called the American Health Care Act, would be phased in over time and would keep the ACA’s premium subsidies for policies purchased through insurance exchanges until 2020, as well as fund Medicaid expansion under the ACA for the same time.

This is just the first draft, and because of the opposition from conservatives in the Republican Party, the current version will not likely be the final one.

House Speaker Paul Ryan has said he wants to see the bill passed by Congress by the end of April. In other words, there will be a lot of work to do in very short order.

 

Here are some of the major provisions of the bill:

  • Eliminating the employer mandate that requires employers with 50 or more full-time or full-time equivalent workers to offer health insurance.
  • Eliminating the individual mandate requiring Americans to be covered either through their employment or by purchasing coverage on the open market or a health insurance exchange.
  • Ending the funding for Medicaid expansion as of 2020.
  • Converting the Medicaid to a program of capped per-capita federal grants to the states, starting in 2019.
  • Eliminating the subsidies available under the ACA and replacing them with age-based, refundable premium tax credits to help people buy insurance. Under the ACA subsidies are based on income, not age, and the proposed age-based tax credits generally would be smaller than the ACA’s.
    The tax credits proposed by House Republicans would start at $2,000 a year for a person under 30, rising to a maximum of $4,000 for a person 60 or older. A family could receive up to $14,000 in credits.
  • Removing ACA taxes and penalties (adding a premium incentive for continuous coverage and allowing insurers to tack on a 30% surcharge for people who let their policies lapse).
  • Protecting employer exclusion (tax write-off for employers and pre-tax for employees).
  • Retaining the “Cadillac tax” on high-value plans, but delaying its implementation to 2025 from 2020.
  • Eliminating the requirement that plans must offer minimum essential benefits.
  • Offering states $100 billion over nine years to establish high-risk pools or other mechanisms for stabilizing the individual insurance market.
  • Allowing insurers to charge older individuals five times higher premiums than they charge younger people. That’s compared with the 3 to 1 ratio under the ACA.
  • Expanding and promoting health savings accounts.

 

 

The fate of the legislation remains to be seen and under the proposal, it would surely not live up to President Trump’s promise that individual plans would be better and less expensive under the GOP’s ACA replacement.

 

We will keep you posted as the legislation develops.

 

 

 

Republicans Consider Axing Tax Exclusion on Employer-sponsored Plans

Money grinding in gears.

As work on trying to overhaul the Affordable Care Act continues, lawmakers are considering a bold and what would likely be a controversial move to eliminate the tax exclusion for employer-sponsored health benefits.

The amount of taxes that are not collected as a result of the exclusion amounts to about $216 billion a year according to the Tax Policy Center, and is therefore a significant pool of untapped funds.

The current exclusion has its roots dating back to World War II when the government ordered that wages be frozen and tax-free health insurance be available. The notion of now taxing the benefit would likely not go down well with anyone who currently receives employer-sponsored health insurance.

While economists have long hated the tax exclusion, workers and employers love it. Depending on how much you pay in taxes, the savings on the cost of expensive health benefits can be substantial. Most Americans under 65 benefit from tax savings associated with this policy.

The outline details how funds raised through the collection of these taxes would be spent on various aspects of the health insurance system like Medicaid, tax benefits for health savings account enrollees, and a universal tax credit-based system that would help individuals buy insurance on the open market.

The House committees are also struggling to deal with the tax credits established by the ACA to help individuals buy coverage on government-operated health insurance exchanges, and how to eliminate that system.

In place of the ACA subsidies, the House bill starting in 2020 would give tax credits – based on age instead of on income. For a person under age 30, the credit would be $2,000. That amount would double for beneficiaries over the age of 60, under the proposal.

Republicans are considering various proposals for the tax exclusion:

  • Cap the tax exclusion at a certain level, such as $10,000 in benefits.
  • Eliminate the tax exclusion altogether.
  • Phase out the exclusion over time.

 

The outline did not specifically state that any captured taxes would specifically be used to pay for tax credit, but analysts say that it would be funded this way.

 

Capped tax exclusion

If the capped method is implemented, it would likely set a maximum amount of benefits that would not be taxed – and any benefits over that amount would be taxed as salary.

 

Cap example

If Congress sets a cap of $8,000 for single coverage, a worker who receives $9,500 worth of health coverage paid for by his employer would not pay taxes on the first $8,000 in benefit. However, the remaining $1,500 would be treated as ordinary income and the full range of tax would be levied on the amount.

Both the employer and the employee would be exposed to the tax.

The danger is that the move could also spur states to adjust their laws to match federal law so that state income taxes are also captured on the benefit.

If talk of a cap sounds familiar, that’s because this is kind of how the ACA “Cadillac tax” was supposed to work. Under that measure, any health plan that is worth more than an established amount would be taxed at 40% for every dollar over the threshold.

The whole idea behind the Cadillac tax was that it would levy health plans that are deemed overly generous and hence do nothing to curtail the use of health services. But eliminating or capping the tax exemption would have no such effect, experts say.

We will keep you posted as the process develops.

 

Republicans Consider Fixing ACA, Not Repealing It

Pandoras box and scull smoke

The steamroller everyone expected from President Trump and the GOP-led Congress to flatten the Affordable Care Act has been put on idle and what was a promised quick outright repeal has morphed into a plan to “repair” the law.

In particular, Republican lawmakers, huddling while trying to devise a repeal-and-replace plan, have instead found that it won’t be so easy, unless they want to cut off millions of people from the health insurance they have purchased on exchanges.

They are most concerned with the political fallout should that happen, not to mention the fact that a repeal would also do away with the Medicaid expansion that has ensured that millions more low-income earners are covered.

With everything in flux now, as we mentioned earlier, it’s best to continue complying with the ACA as it still is the law of the land and it’s looking more and more likely that the law won’t be repealed, but will be changed. And lawmakers have indicated that they may have a fix on the table by the end of the year.

Top GOP lawmakers have publically stated that some parts of the law will remain intact and others will be “fixed.”

Surprisingly, the Republican leadership’s views on the subject will now likely align more with Democrats who have acknowledged the flaws in the law and that amending the law is the best way to go.

While conservative and Tea Party Republicans say the law can’t be fixed and should be repealed, their desired outcome is looking less and less likely. Also, there is no consensus within the GOP on what should come next.

Members of the conservative House Freedom Caucus held a press conference on Feb. 7 saying that Republican legislators should not go soft on their promise to repeal the law and instead should quickly introduce new legislation that would repeal the ACA.

They want to model the bill after legislation that Congress passed but President Obama vetoed – in 2015. That legislation would have repealed the mandate that individuals have health coverage and that companies with 50 or more employees provide employees affordable insurance.

It also would have ended federal subsidies to help people afford insurance under the ACA and scrapped funding for Medicaid expansion. It also gave lawmakers two years to come up with a replacement plan.

But it’s the leadership that decides which bills move forward and out of committee.

For now, Republicans are up against a self-imposed deadline after they passed a measure in January that allowed them to begin putting together a budget process that will undo parts of Obamacare.

Under that deadline, four congressional committees were supposed to have drafted legislation repealing the law by Jan. 27, however no bill was introduced. Now pundits say that may not happen until April.

Republicans are now considering four drafts, language from which they will likely fuse into one bill.

Without Democrats, Republicans are limited in how much they can undo the law.

Congress will have to walk a delicate path and find ways to help middle-class Americans, some of who have complained about high and skyrocketing insurance premiums. Others are worried about repeal because the ACA has given them access to life-saving treatment.

Also, there are other forces at play, including stakeholders like businesses, health insurers, drug companies and the medical industry, which all have their own agendas and will be lobbying hard.

For now, continue complying with the law and cover your employees if you are an applicable large employer – and file your papers with your staff and the IRS on time.

What Does President Trump’s Executive Order on ACA Mean?

Worker repairing  an engine rotor winding of copper wire.

Donald Trump’s first act after assuming the presidency was to sign an executive order that authorizes federal agencies to scale back as many parts of the Affordable Care Act as possible within the confines of the law.

The executive order does not abolish the landmark legislation, but sets the stage for agencies to act immediately on regulations that are deemed overly burdensome. The agencies, particularly the Department of Treasury and the Department of Health and Human Services (HHS), will have wide latitude in making regulatory changes thanks to the broad scope of the order.

But don’t expect immediate changes in the law. Regulations cannot be rewritten, amended or replaced without going through the rule-making process, which includes notice and comment periods. That can take months, or sometimes years.

Another reason you should not expect immediate change is that the order specifically states that agencies can act only “to the maximum extent permitted by law.”

The order came on the heels of the House of Representatives approving a budget blueprint that will allow Republicans to repeal major provisions of the ACA without the threat of a Democratic filibuster in the Senate. But that action can only undo parts of the law that have an effect on the federal budget and they would need some cooperation from Democrats to repeal other parts and forge a replacement.

That means that most of the laws and regulations governing employer plans will likely stay in place for the moment, although it’s unclear for how long.

Trump has been on record saying that the repeal of the law should not take place until a replacement plan is also in place, in order to avoid creating disruptions in the market. He also said that everyone in the United States would be covered.

Here are some of the more relevant passages of the executive order:

“…it is imperative for the executive branch to ensure that the law is being efficiently implemented, take all actions consistent with law to minimize the unwarranted economic and regulatory burdens of the Act, and prepare to afford the States more flexibility and control to create a more free and open healthcare market.”

It also said the HHS secretary and other agency heads “shall exercise all authority and discretion available to them to waive, defer, grant exemptions from, or delay the implementation of any provision… that would impose a fiscal burden on any State or a cost, fee, tax, penalty, or regulatory burden on individuals, families, healthcare providers, health insurers, patients, recipients of healthcare services, purchasers of health insurance, or makers of medical devices, products, or medications.”

As mentioned, the process for making regulations takes time. Proposed regulations have to be drawn up and they have to go out for public comment, including holding hearings so that all sides can argue for or against the changes or recommend adding more changes.

Adding more confusion and concern, Trump senior adviser Kellyanne Conway said that the president may stop enforcing the law’s tax penalty against people who don’t buy insurance. But that move alone could snowball into an ugly scenario where more healthy individuals bale out of their insurance policies, which in turn would likely lead to insurers abandoning the public insurance exchanges.

She said that he would consider repealing the employer mandate quickly, as well. But that may be not be legal as the individual and employer mandates are explicit provisions of the law passed by Congress, and they cannot be overridden by the executive branch.

Be Prepared for Changing ACA Landscape

Concept of problem in business

With president-elect Donald Trump and Congressional Republicans vowing to repeal the Affordable Care Act, employers that have spent the last few years preparing for and complying with the law have a right to be concerned about what’s in store.

While leaders in Congress have promised to swiftly put an end to the ACA, it’s not clear how fast it would happen, if at all, and what, if anything, would replace it.

Blue Cross/Blue Shield recently issued an alert about what its policy team had learned and is anticipating.

 

Administration moves

Blue Cross/Blue Shield noted that three executive actions could occur shortly after Trump is sworn into office:

  • His administration could order the Treasury Department and the IRS to stop enforcing penalties on taxpayers who do not enroll in health insurance.
  • The administration could stop defending lawsuits that challenge the legality of health insurance subsidies that are paid to insurers that insure low-income individuals who purchase coverage on public exchanges. If that happens, it could send shockwaves through the industry, financially affecting a number of insurance companies and leading to market disruptions, Blue Shield predicts.
  • The administration could prevent payments related to the transitional reinsurance program. Republicans have argued that payments from the program must go to the Treasury before health plans. The administration could redirect $5 billion owed to plans for the 2016 plan year, which would zero out payments that are expected in mid-2017.

 

Congressional action

Anything Congress will want to do in the near term will need bipartisan support because the minority-party Democrats could mount a filibuster in the Senate to keep any significant legislation from moving forward. However, Democrats’ hands would be tied if Republicans change the law during the budget reconciliation process.

Republicans could:

  • Move to repeal parts of the ACA that have implications for the federal budget, such as eliminating:
  • ACA tax credits
  • The Medicaid expansion
  • The individual and employer mandate penalties
  • Various ACA taxes used to pay for health reform.

 

That said, parts of the law that don’t affect the budget, like the ban on insurers from refusing coverage based on pre-existing conditions and dependent coverage to age 26, would need legislation.

  • Introduce legislation to kill the ACA and replace it with provisions they espouse, such as:
  • High-risk pools
  • Allowing individuals and businesses to buy insurance across state lines
  • Overhauling the Medicaid program.

 

For now though, the only thing employers can do is to watch what’s going on in Congress and follow developments with us. We’ll keep you posted on what’s happening.

Change could come suddenly, or it may be drawn out for years as repealing the law without a strong replacement would leave millions of Americans in a bind – and many of them would include the same people that voted for Trump as president and Republicans in Congress.

 

 

‘Cadillac Tax’ Delay Gives Employers Relief

cadillac tax dollar

Employers and their staff will get some relief for another few years from the impending “Cadillac” health insurance tax after Congress approved a delay as part of the budget deal it approved.

President Obama has said he will not veto the new budget, which means that the excise tax will not take effect until 2020, instead of 2018. While some analysts predict that the delay is a precursor to an outright repeal of the tax, benefits experts say it is unlikely to dampen ongoing efforts by employers to rein in their health insurance costs.

Under the Affordable Care Act, the Cadillac tax will be applied at a rate of 40% on any premium in excess of certain thresholds, currently set at $10,200 for an individual policy and $27,500 for family policies. Those thresholds will change annually based on the rate of inflation.

Under the law, health insurers are required to pay the tax, but they are expected to pass on the tax to group health plans, which will result in both employers and employees paying it in the end.

Employer groups lauded the delay. The Washington-based American Benefits Council, which counts mostly large employers as its members, said it considers the delay a “down payment on a full repeal.”

Other employer groups said they would use the extra time to further explore ways to keep their policies under the Cadillac threshold.

The tax is designed to dissuade the use of more expensive and generous plans, which many health care pundits blame for over-utilization of health services. The tax is also expected to help pay for subsidizing health insurance costs for low-income individuals purchasing plans through public exchanges.

Despite the delay, employers are likely continue to seek out ways to reduce their overall health insurance spend, which continues to increase every year, albeit at lower rates than we saw in the decade prior to the ACA.

Group health plan costs rose 3.8% in 2015 from the year prior to an average $11,635 per employee, according to Mercer Benefits.

 

Cadillac tax is serious business

According to an August 2015 survey by the National Business Group on Health, 72% of employers expected at least one of their benefit plans to hit the excise tax in 2020 if they didn’t control costs.

According to the bipartisan nonprofit Committee for a Responsible Federal Budget, delaying the Cadillac tax until 2020 would cost the government $16 billion. Repealing it would cost $91.1 billion over the next 10 years, the committee said recently.

There was another caveat in the budget bill. It requires the U.S. comptroller general and the National Association of Insurance Commissioners to conduct a study of whether the ACA uses “suitable” benchmarks to determine if the tax should be adjusted to reflect age and gender factors in setting the thresholds for levy.

 

What you can do

According to the International Foundation of Employee Benefit Plans’ “2015 Employer-Sponsored Health Care: ACA’s Impact Survey,” 34% of employers had started taking action to avoid triggering the 2018 Cadillac tax.
Actions include moving to a consumer-directed health plan (53%), reducing benefits (37%) and adopting wellness and preventive initiatives (28%).

You should run a financial projection to determine if your organization is expected to be affected by the Cadillac tax. If you expect to be impacted, talk to us about cost mitigation strategies and keep an eye out for upcoming proposed regulations.

As long as the tax hasn’t been repealed, the smart money is to stay on top of it.