New Legislation Proposes to Repeal and Replace the ACA

by Perkins Coie
Contact

Perkins Coie

The U. S. House of Representatives (the House) proposed two bills to “repeal and replace Obamacare” last week, and while many popular consumer protections under the Patient Protection and Affordable Care Act (ACA) look to be preserved at this stage, some significant changes are included that could have an impact on employers and other plan sponsors if signed into law. We’ve highlighted a few of these potential changes below. 

While the bills, which together have been named “The American Health Care Act,” will likely be amended or otherwise modified as they make their way to the president, it is our first real glimpse of what Congress and the Trump administration envision for the future of healthcare. Until new legislation is signed by the president, we recommend staying the course with respect to your current ACA compliance strategy.

Mandates Go, But Some Consumer Protections Stay

The individual mandate, as well as the mandate for large employers to offer coverage to full-time employees (often referred to as the “play-or-pay” mandate), would effectively be repealed by reducing applicable penalties to zero, retroactive to January 1, 2016. A proposed repeal of these mandates comes as no surprise. Under the ACA, the mandates sought to enroll healthy individuals to bring down the cost of premiums for all. Under the new legislation, there would be an incentive instead, where an individual who fails to have coverage would pay an increased premium to the issuer rather than a penalty to the federal government. This “continuous coverage incentive” begins in 2018 for certain individuals and would impose a 30% premium surcharge if their coverage lapsed for more than 63 days during the 12-month period preceding enrollment—regardless of health status.

The legislation retains consumer protections that have become popular under the ACA, such as coverage for dependent children to age 26 and prohibitions on annual and lifetime limits. Also, no repeal is proposed for the prohibition on preexisting condition exclusions. 

The legislation also proposes, effective in 2018, to prohibit the use of premium tax credits at the public Marketplaces to pay for any plan covering abortion services, other than services for saving the life of the woman or in cases of rape or incest, and to place a one-year freeze on federal Medicaid funding for Planned Parenthood and any other “prohibited entity” providing such abortion services.  

Promotion of Consumer-Driven Healthcare

The legislation would loosen restrictions and increase limits beginning in 2018 on certain tax-favored accounts used to pay for qualified medical expenses. The maximum contribution to a health savings account (HSA) would increase to equal the sum of the annual deductible and out-of-pocket expenses under the high-deductible health plan (HDHP), which could be over $13,000 for family coverage. Both spouses could make catch-up contributions of up to $1,000 each to the same HSA. The excise tax for using HSA funds for ineligible expenses would be reduced from 20% to 10%. And qualified medical expenses may be incurred up to 60 days before the HSA was established.

Similarly for health flexible spending accounts (Health FSAs), the $2,500 ($2,600 as adjusted for inflation for 2017) ACA cap on contributions to Health FSAs would be repealed for tax years beginning with 2018. And for Health FSAs, HSAs and other tax-advantaged medical savings accounts, the ACA prohibition on the use of funds for over-the-counter medications would be repealed for tax years beginning with 2018.

Refundable Tax Credits for Health Coverage

Under the ACA, federal tax subsidies at the public Marketplaces are based on household income and reduce the cost of an individual’s Marketplace policy. The legislation would replace these subsidies with an age-based refundable tax credit. The credit would range from $2,000 for individuals who are under 30 years old to $4,000 for individuals aged 60 and over, capped at $14,000 per family. The credit would be phased out for individuals with modified adjusted gross incomes over $75,000 ($150,000, filing jointly).

The legislation delegates the authority to the U.S. Secretary of the Treasury to create a simplified reporting method for employers offering coverage to employees for purposes of tax credit eligibility that will use Form W-2. While no changes have been included with respect to the complex ACA reporting on Forms 1094/1095-B/C, the House Committee on Ways and Means intends that the new reporting methodology will make the ACA reporting redundant, allowing the Secretary of the Treasury to cease enforcement of the current ACA reporting. 

Further Delays to the Cadillac Tax

The ACA’s 40% excise tax on high-cost, employer-sponsored health coverage, known as the “Cadillac Tax,” was previously postponed to become effective in 2020. The legislation proposes to further postpone the effective date to the 2025 tax year.

Rolling Back Medicaid Expansion

Beginning in 2020, the legislation would repeal Medicaid expansion for adults with income above 133% of the federal poverty line. Also in 2020, state Medicaid coverage would no longer be required to provide essential health benefits required by the ACA. In addition, federal funds would be provided under a “per capita cap model”—imposing per-enrollee limits on federal Medicaid payments to states.

Conclusion

While it is important to stay abreast of any proposed legislation, until the American Health Care Act has been signed by the president, we recommend that you stay the course with respect to your current ACA compliance strategy. Stay tuned and watch for our future updates as the Trump administration works towards its campaign promise of repealing the ACA.

For more information, here are some links to copies of the proposed bills: House Ways and Means Committee Bill: Legislation and Section-by-Section Summary; and House Energy and Commerce Committee Bill: Legislation and Section-by-Section Summary.

 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Perkins Coie | Attorney Advertising

Written by:

Perkins Coie
Contact
more
less

Perkins Coie on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Privacy Policy (Updated: October 8, 2015):
hide

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.

Security

JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.