On May 4, 2017, the House of Representatives narrowly passed the American Health Care Act (AHCA) by a vote of 217 to 213. This is considered a big step for the House Republicans in fulfilling President Trump’s campaign promise to repeal the Affordable Care Act (ACA). The bill will now go to Senate for debate and amendments and then a vote. The bill must also pass in the Senate for it to become law.
The AHCA was able to garner enough support in the House due to the introduction of the MacArthur and Upton amendments, respectively. Notably the MacArthur amendment permits states to obtain waivers from the following provisions:
- The ACA essential health benefit requirement, allowing states to define the categories of services that health plans must cover.
- The AHCA age-based premium of 5:1, allowing states to set their own age band.
- The prohibition against engaging in health-status underwriting, but only for those individuals who did not maintain continuous coverage in the last 12 months, and only if the state has established an AHCA-approved high-risk pool.
Here’s what employers need to know about the revamped healthcare plan.
It eliminates the employer mandate
The AHCA eliminates the controversial requirement under the ACA that employers provide health insurance to employees. Penalties for noncompliance with “pay or play” coverage requirement are zeroed out as of 2016, effectively eliminating the employer mandate. However, the form 1094 & 1095 reporting requirements are unchanged by the bill.
It gives states greater control over what’s included in health plans
The AHCA gives the states more power over what type of health insurance is offered (as mentioned in the MacArthur amendments above). It is important to note that the waiver allowing states to take into account health status in underwriting does NOT allow them to exclude coverage for pre-existing conditions. The waiver would allow states to charge higher premiums to those with pre-existing conditions, but only those who let their coverage lapse in the last 12 months.
It addresses many health savings account (HSA) enhancements
The AHCA eliminated the prohibition on over-the-counter drugs as qualified medical expenses. It also increases the annual tax free contribution limit to equal the limit on out-of-pocket cost sharing under qualified high deductible health plans ($6,550 for self only coverage, $13,100 for family coverage). Under the AHCA the tax penalty for HSA withdrawals used for non-qualified expenses will be reduced from 20% to 10%. Finally, it allows spouses to make catch-up contributions to the same HSA.
Until the AHCA is passed by the U.S. Senate and signed into law by President Trump, all existing ACA requirements remain in effect, including penalties for noncompliance. We will be watching closely as the AHCA makes it’s way through the Senate and will keep you apprised of any new developments.