The American Health Care Act: An overview of the provisions affecting employers

The American Health Care Act, which aims to repeal and replace certain provisions of the Affordable Care Act, is reportedly expected to be voted upon by the U.S. House of Representatives on Thursday. Below is an outline of some provisions of the bill that could affect employers and plan sponsors.

What could change? 

→ Elimination of the Employer Mandate. Penalties for employers who do not provide full-time equivalent employees with affordable health coverage would be eliminated retroactively back to the 2016 tax year and beyond. The reporting requirements would still be in place, unless further regulatory guidance was issued for the reporting.

→ Elimination of the Individual Mandate beginning in Tax Year 2016. However, premiums would increase for individuals who let their insurance lapse.

Delay of the Cadillac Tax. This bill proposes to delay the so-called “Cadillac Tax” until 2025. Affecting 1-in-4 employers, the Cadillac Tax is a 40 percent excise tax to be imposed on high-cost employer-sponsored group health plans.

→ Elimination of the Small Employer Tax Credit, beginning in 2020.

Proposed New Reporting. Employers would be obligated to provide the federal government with statements regarding whether specific employees are eligible for employer-sponsored health coverage. W-2 reporting would be modified to reflect new health coverage requirements.

Proposed New Obligations Changes. Under the proposed American Health Care Act, some obligations would change, including:

Cost-sharing.

Flexible Spending Account (FSA) limit would be repealed completely.

Reinstatement of the Certificate of Creditable Coverage.

Creditable Coverage Tax Deduction would be reinstated. Under the proposed new law, the tax deduction for employers who receive Part D retiree drug subsidy (RDS) payments to provide creditable prescription drug coverage to Medicare beneficiaries would be reinstated beginning in 2018.

Health Savings Account (HSA) limits and rules.

Affordability limits.

What could stay the same?

Below is a list of current insurance and health care provisions expected to stay the same under the proposed replacement for the Affordable Care Act:  Employer-sponsored group health coverage would continue to be purchased using pre-tax dollars. Keeping this major tax break in place is a big win for employers.

→ Wellness incentives remain unchanged. This includes premium incentives for biometric screenings.

Provisions Affecting Plan SponsorsUnder the proposed new bill, most of the insurance reform under the Affordable Care Act would stay the same, including:

• Requirement to cover pre-existing conditions.

• Requirement to cover dependents until age 26.

• Preventative benefits must be covered, with no cost-sharing.

• Out-of-pocket maximums.

• Lifetime and annual limits.

• Nondiscrimination.

• Essential health benefits requirements.

This legislation is not final, and employers should not make any changes based on this announcement. For more information, contact us via the Web, and a member of our client service team will work to answer any questions you may have.