House Passes AHCA Bill: Possible Changes for Public Sector Employers

The U.S. House of Representatives passed the American Health Care Act (AHCA) yesterday on May 4, 2017, intended to repeal and replace the Affordable Care Act (ACA). Next, the bill moves onto the Senate for a vote. It is expected that revisions will be made. If passed by the Senate, it will move onto President Trump to be signed into law.

4 Changes for School, City and County Employers

1. Employer Mandate. The penalty imposed under this provision would be zero beginning in 2016, effectively repealing it (although it will still exist).

2. Health Savings Accounts (HSAs).
   • The AHCA proposes to increase HSA contribution for 2018. The limit would equal the maximum sum of the deductible and out-of-pocket expenses individuals would pay in a high-deductible health insurance plan. It will be at least $6,550 for an individual and $13,100 for a family.
   • Spouses would be allowed to make catch-up contributions to the same HSA. Beginning in 2018, both spouses of a married couple could make catch-up contributions if both are eligible and either has family coverage.
   • Also proposed: if an HSA is established 60 days after an individual’s high deductible health plan (HDHP) coverage beings, the HSA funds can be used to pay for expenses incurred the day the HDHP coverage began.
   • HSA penalties would be reduced from 20% to 10% if HSA funds are used for non-medical purposes.
   • Certain tax-advantaged HSAs would again be used to purchase over-the-counter medications beginning in 2017.

3. Cadillac Tax. Under the proposed new bill, the Cadillac Tax will be delayed until 2026.

4. Flexible Spending Accounts (FSAs). Contribution limits would be eliminated effective 2017.

Additional Potential Changes Include:

• Pre-existing condition exclusions will remain banned, but states can apply for waivers to allow insurance companies to charge more for pre-existing conditions if an individual lets their coverage lapse
• Late-enrollment surcharge for individuals who have a lapse in coverage
• Replace health insurance subsidies with tax credits
• States can apply for waivers from the ACA’s essential health benefits requirement and community rating rules
• Repeal of the ACA small business tax credit
• Reduction of the medical expense tax deduction income threshold to 5.8 percent
• Repeal the following taxes and fees:
  • Medicare tax for high-income individuals
  • Medical devices excise tax
  • Health insurance providers fee
  • Fee on certain brand pharmaceutical manufacturers
  • Sales tax on indoor tanning services
• Repeal the ACA’s Medicaid expansion
• Creation of a Patient and State Stability Fund that will help states lower costs and increase access to high-quality health care for their citizens
• Age rating restrictions would change from 3:1 to 5:1

These key ACA provisions will remain in place:

• Coverage for adult children up to age 26
• Nondiscrimination rules (on the basis of race, nationality, disability, sex or age)
• Ban on lifetime and annual limits for essential health benefits
• Cost sharing limits on essential health benefits for non-grandfathered plans

NIS will continue to monitor the situation and keep you informed of any regulations/requirements that may change the way you administer your plan. Stay tuned to our blog. Download House Republicans Pass Amended AHCA to read more.