Updated Senate health care bill includes HSA changes, retains pair of ACA taxes on high earners

A revised version of the Senate health care bill was released Thursday, and a vote on the legislation could reportedly happen as early as next week. The Better Care Reconciliation Act (BCRA) would repeal and replace numerous provisions of the Affordable Care Act, but some elements would remain in place.

Here is a brief overview on changes affecting employers and employees if the Senate bill becomes law, as well as a look at the health care elements that would remain as-is. Our thanks to the Pope Law Firm for their insights and guidance, which are included throughout this text, and our Our thanks to the Council of Insurance Agents and Brokers and Steptoe & Johnson LLP for their summaries of what's included in the Senate bill, including the new elements. Changes that were added in the Senate bill published Thursday are denoted.

What would change if the Senate bill is enacted?

The employer mandate would be eliminated.

Beginning in the 2016 tax year, penalties would be eliminated for applicable large employers who do not provide full-time equivalent employees affordable health coverage. While the Internal Revenue Service health coverage reporting requirements would still be in place, the IRS could eliminate or scale back employer-reporting rules.

The individual mandate would be eliminated.

The Senate bill would remove tax penalties for individuals who do not maintain health insurance.

Individuals who go without coverage for about two consecutive months in a one-year period would face a six-month waiting period to re-enroll. (New to Senate bill.)

Individuals who let their coverage lapse for at least 63 consecutive days in the past 12 months would face a mandatory six-month waiting period before seeking coverage again. This could give individuals incentive to keep employer-sponsored group insurance.

The Cadillac Tax would be placed on hold until at least 2026.

Affecting one-in-four employers, the Cadillac Tax is an excise tax to be imposed on high-cost employer-sponsored group health plans.

Flexible Spending Account (FSA) limits would be repealed entirely.

There would be no limit to FSA contributions, with qualified expenditures to include over-the-counter medications.

Numerous Health Savings Account (HSA) changes would take effect.

Some of the notable changes are:

—  HSA funds could be used on health expenses for dependents under 27 years old. (New to Senate bill.)

—  In some cases, HSA funds could be used on high-deductible health plan (HDHP) premiums. (New to Senate bill.)

—  However, HSA funds could not be used for HDHP premiums for plans covering abortions. (New to Senate bill.)

— HSA tax-free limits would be increased. The new limit would nearly double the current limit, because the new limit would equal the limit on out-of-pocket cost sharing under qualified high-deductible health plans. (The current 2018 limits: $6,650 for self-only coverage, $13,300 for family coverage.)

— Over-the-counter medications would be considered qualified medical expenses.

— Expenses incurred as many as 60 days before establishing an HSA would be covered.

—  A spouse would be allowed to make a catch-up contribution to another spouse’s HSA.

— The tax penalty for HSA withdrawals would decrease from 20 percent to 15 percent.

Association health plans for small businesses could be established as large group plans.

Of note: the plans would not have to abide by community rating and would be exempt from having to offer the 10 essential health benefits required under ACA.

What would stay the same if the Senate bill is enacted?

Let's begin with a couple ACA reforms that have been added back to the Senate repeal-and-replace bill.

In the latest legislation being considered, the 3.8 percent net investment income tax will remain in place, as will the 0.9 percent Medicare additional payroll deduction tax. Both taxes affect higher-earning individuals and families, and both were slated to be eliminated in earlier versions of the Republican bills, but both levies were included in Thursday's updated legislation.

There are numerous other ACA reforms left unchanged in the Senate bill, including:

— Requirement to cover pre-existing conditions.

—  Requirement to cover dependents until age 26.

—  Out-of-pocket maximums.

—  Lifetime and annual limits.

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

—  Nondiscrimination.

—  Essential health benefit requirements.

Other elements remaining in place under the Senate bill include:

—  Employer-sponsored group health coverage would continue to be purchased using pre-tax dollars.

— Wellness incentives remain the same, including premium incentives for biometric screenings and a surcharge for tobacco use.

Contact us

For more information on the Senate bill and other employee benefits matters, please contact a Plexus client service team representative in Deer Park, Ill. (847-307-6100), Chicago (312-606-4800), Dallas (972-770-5010) or Oklahoma City (405-840-3033).