House Republican leaders have officially unveiled the first part of their ACA “repeal and replace” legislation. Here are some of the key headlines for employers from the American Health Care Act, as reported by the House Energy and Commerce and Ways and Means Committees:
- Individual and employer mandates “repealed”: The bill would effectively repeal both the Individual and Employer Shared Responsibility rules by reducing the associated penalties to zero. So the rules would remain on the books, but there would be no consequence for violating them. These changes would be effective for months beginning after December 31, 2015, thus providing retroactive relief to individuals and employers that otherwise would have been subject to penalties in 2016.
- Some employer reporting still required: The bill would establish a new employer reporting requirement to support the bill’s proposed advanceable, refundable health insurance premium tax credit. This credit would not be available to anyone who is eligible for employer-sponsored coverage that meets certain minimum requirements. In order to enforce this eligibility requirement, employers would be required to report offers of coverage on employees’ Forms W-2. The ACA’s information reporting requirements would not be repealed; however, the drafters of the bill anticipate the IRS will stop enforcing the ACA requirements when the new health insurance tax credit and related reporting requirements are implemented. The new rules would be effective for months beginning after December 31, 2019.
- The high value tax will be delayed (again), but not repealed: The bill would further delay the effective date of the ACA’s 40 percent high value tax so that it would not begin to apply until 2025.
- The ACA’s group health plan mandates survive: The bill would not repeal or alter many of the ACA’s group health plan mandates, including the ban on preexisting condition exclusions and the requirement for employers to allow employees’ children to remain eligible until age 26.
- Enhanced HSAs: The bill would make several changes to enhance health savings accounts (HSAs). The maximum annual contribution limit would be the sum of the minimum annual deductible and maximum out-of-pocket expense requirements for HSA-compatible high-deductible health plans (HDHPs). So, beginning in 2018, the basic limit will be at least $6,550 for self-only coverage and $13,100 for family coverage. The bill would also reduce the excise tax on non-qualified HSA distributions from 20 percent to 10 percent. It also would allow both spouses to make catch-up contributions to a single HSA, and relax the rule relating to reimbursing otherwise eligible expenses from an HSA if they were incurred before the HSA was established.
- No annual limit on salary reduction contributions to health FSAs: The bill would repeal the $2,500 annual inflation-adjusted limit on salary reduction contributions to health flexible spending arrangements (FSAs). It also would repeal the rule prohibiting health FSAs and health reimbursement arrangements (HRAs) from reimbursing the cost of over-the-counter drugs obtained without a prescription.
Also of interest, the bill would repeal the 0.9 percent additional Medicare tax on high-income individuals. It would also again permit employers to deduct retiree medical expenses allocable to the Medicare Part D subsidy.
Additional information, including the text of the proposed bill, is available at https://housegop.leadpages.co/healthcare/.
Robert B. Davis is a managing director in Deloitte Consulting LLP specializing in employer-sponsored retirement and health and welfare benefit plans. In addition to advising clients on a range of compliance-related issues, he leads the Washington Rewards Policy Center of Excellence.
is a managing director in Deloitte Consulting LLP and the national practice leader for Deloitte Consulting’s Employer Health Reform Strategy practice and the Employer Health Care Consulting practice.