By Scott Lyon, Senior Vice President
*Edited to add: The AHCA bill passed in the House May 4, 2017.
This afternoon, the House Representative will vote on legislation that seeks to repeal and replace the Affordable Care Act (ACA). The single most important thing to remember, at least at this moment in time is, until the Affordable Care Act is not the law of the land, it is the law of the land. All of the requirements, regulations and penalties still apply until the U.S. House of Representatives and the U.S. Senate agree on final language, affirmatively vote on repeal and send new legislation to the President which he then signs. That won’t be easy and it will take some time.
As SBAM reviews the legislation, we do that through the lens of the small business community. Over the next weeks and months, there will be much written on the provisions, good, bad and indifferent. Our goal is to help you understand what provisions will impact your business, as well as how and when things may play out.
The American Health Care Act (AHCA) is designed to end the employer and the individual mandates by reducing the penalties for non-compliance to zero. Additionally, they will repeal the litany of taxes installed to pay for the Affordable Care Act including the tax on health insurance premiums, medical device tax, tanning tax, Medicare Part D tax, etc. The current method of premium and out of pocket subsidies would be replaced with a new form of subsidy for people purchasing coverage in the individual market based upon age with an income cap. The Small Business Tax Credit would end as well. Given that very few small businesses took advantage of this, it most likely won’t be missed by many. The “metal tiers” that resulted in Platinum, Gold, Silver and Bronze level plan designs and essential minimum coverage would also go away.
The popular ACA provision that allows children to remain on their parent’s health insurance plan until age 26 is carried over in the new bills as are the restrictions on annual or lifetime benefit amounts. Health Savings Accounts (HSAs) would be expanded through a significant increase in the allowable contribution limits to $6,550 for an individual and $13,100 for a family; includes a catch up provision of up to $1,000 for people aged 55 or older (double today’s limits). It also allows over-the-counter medications to be considered qualifying expenses for HSAs and Section 125 flexible benefit plans.
Insurance carriers would be allowed to expand their age ratio (the distance from the lowest premium to the highest) from a factor of 3:1 to 5:1. There is also a provision that gets at one of the serious problems of the current law – individuals carrying insurance only long enough to get a medical condition taken care of and paid for by insurance and then dropping out of the insurance market. The proposal is that consumers who maintain continuous coverage, without a break in coverage of 63 days or more, couldn’t be denied insurance because of pre-existing conditions. However, if there is a break in coverage of 63 or more days, the insurance premiums can be increased by 30% for up to one-year. An amendment shepherded by Rep. Fred Upton, sets aside $8 billion over 5 years to help low income people with pre-existing conditions offset any penalties.
Employers will still have to report the value of the health care benefit on the W-2 and significant dollars would be allocated to help cover the costs of individuals with serious medical conditions. The bill allows for flexibility at the state level as to how to get at this either through high risk pools, reinsurance or similar measures.
As you might expect, there is a lot more to this including significant changes to the expansion of Medicaid which would turn to a block granted program in 2020 based upon a per capita formula. Meaning the decisions about who is covered, what is covered, etc. in Medicaid would be a state by state decision for the states, including Michigan, that expanded Medicaid under the ACA. Topics of debate may be how the Medicaid Expansion population will be accounted for in the block grant era when funding for this population will begin to drop off.
Remember the Saturday morning TV clip – “How a Bill becomes a Law.” There is a long way to go before this proposal becomes law; if it ever becomes law as currently written. First, once passed by the House of Representatives, if faces an uncertain future in the Senate for their work and eventually to the President for his signature or veto.
Now, my opinion on what to expect. When dealing with such a huge piece of our economy, there is a lot at stake. Personally, I worry that the GOP is headed toward making the same mistake that the Democrats made with the Affordable Care Act. To date, there does not seem to be much that gets at the cost of health care which drives health insurance premiums higher. Unfortunately, this is the real heavy lifting.
Stay tuned…