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Wednesday, March 08, 2017 4:14:00 PM Categories: News and Views

The Republican controlled Congress announced yesterday that it has taken the first steps toward repealing the Affordable Care Act (ACA) and replacing it with the American Health Care Act (AHCA). There will be a lot of steps and a lot of time between where we are now and when the new law is enacted and implementing regulations issued. Even if everything goes without a hitch, this process will run well into 2018, and the timelines in the legislation have effective dates that reflect this reality.

So, it’s too soon to be sure what will happen, but not too early to take stock of what might happen. For one thing, you should expect a deluge of information with detailed assessments, predictions, and warnings. Most will have little to do with employers and their group health plans.

Here is our 30,000-foot view of what is happening, from the employer perspective.

A lot of the ACA taxes are being repealed. For employers, the most significant tax changes are:   

  • The “Cadillac” tax on plans valued above a certain level is retained but delayed until 2025.
  • The treatment of Retiree Drug Subsidy (RDS) payments as taxable is eliminated. Plans offering retiree drug coverage through insured arrangements may want to take another look at self-funding. RDS payments may now make self-funding the better deal.

Many of the ACA benefit limits are retained: no annual limits; no lifetime limits; no pre-existing condition limits; all remain as do maximum out-of-pocket limits and coverage for dependents through 26. Some changes to benefits are proposed. The rating of plans (gold, silver, bronze) is not retained. Employers may find more flexibility in benefit design, but will still need to meet levels offered by other employers competing for the same labor pool. Neither the ACA nor the AHCA changes that reality.

Both the ACA and the AHCA use individual penalties and rewards but approach them differently. These do not appear to apply to employer plans but will set the context for how individuals value employer coverage and COBRA.

  • The ACA imposed tax penalties on persons not getting coverage. The AHCA imposes a 30% premium surcharge on persons who cannot show continuous coverage (defined as a lapse of 63 days during the prior 12 months). 
  • The ACA provided an income-based premium subsidy for persons getting individual coverage. The AHCA provides an age-based tax credit for persons purchasing health coverage.

Both laws depend on employer reporting for enforcing these penalties and rewards. While there is speculation that employer reporting may be simplified, this may be wishful thinking. Any verdict on this must await IRS regulations. The AHCA bills do not call for a relaxation in current employer reporting.

The AHCA does eliminate the employer mandate, but that has little practical effect for most employers offering coverage. Employer coverage was offered before the ACA mandate, and will continue after the AHCA non-mandate for the same reason. Employers offer health coverage to recruit and retain a competitive, quality work force. That fundamental fact of being an employer in America remains unchanged.

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