House Proposal to Repeal and Replace the Affordable Care Act
Monday, March 6, 2017, the House Ways and Means Committee and the Energy and Commerce Committee released separate legislation with intention to repeal and replace key components of the Affordable Care Act (ACA) through the budget reconciliation process. The budget reconciliation process allows Republicans to propose and pass legislation reducing federal spending, reducing the deficit and streamlining the process of considering federal budget and tax-related legislation. This is key to the potential passage of legislation for the Republican Party. They do not hold a required 60-seat super majority in the Senate allowing them to overcome a filibuster through the traditional legislative process. With that said, we should all buckle our seatbelts because this is almost guaranteed to be a quick and bumpy ride.
There is pressure on the Republican Party to take action quickly because insurers need to decide what plans they will offer in the individual marketplace for 2018 this spring. Both Committees intend to markup the legislation today, make revisions, prepare a unified presentation, and put the legislation before the entire House of Representatives - all before their spring break. This is a lofty goal and it is unclear whether it can be accomplished in time because the Congressional Budget Office has not provided a cost analysis. If their analysis does not reflect cost reduction, the proposal will need to be further revised.
You may be wondering what these proposals actually do. The impact depends on your perspective as employer, individual, or insurer. Following are some of the recommendations. For more complete information, you can review a summary of both proposals at House Ways and Means Proposal and House Energy and Commerce Proposal.
- Employer mandate penalties are repealed retroactively to the beginning of 2016 (however, reporting of some nature will continue to be required)
- Cadillac Tax will be further delayed to 2025
- Small Employer Tax Credit will be eliminated in 2020 and unavailable beginning in 2018 if abortion services are covered in the plan
- Over the counter medication will receive tax favored status in employer sponsored plans like flexible spending accounts and health reimbursement arrangements (this also means they may also be reimbursed with health savings account dollars for individuals) in 2018
- The flexible spending account contribution limit will also be repealed in 2018
- Individual mandate penalties are repealed retroactively to the beginning of 2016 (Moving forward insurers may be able to apply a 30% surcharge to individuals who have had more than a 63-day break in coverage to encourage continuous enrollment.)
- Medicare tax for high wage earning individuals will be repealed in 2018
- The medical expense deduction limit will be decreased to 7.5%
- Health Savings Accounts will have higher limits and additional excise tax is repealed
- Individual tax credits through state and federal exchanges remain in place until 2020, however, it is intended that they will be replaced with an alternative that narrows eligible individuals and caps the credit
- Federal funding to states for Medicaid expansion will end in 2020
- Health Insurance Plan tax is repealed
- Insurers will be allowed to charge older individuals up to five times more than younger individuals under insurance rating rules (the current rules allow a ratio of 3:1)
- Market reforms like the elimination of pre-existing condition provisions and dependent coverage extension through age 26 will remain in force (These provisions also apply to self-funded health plans.)
This is just the initial step in the process. Expect revisions and expect them to occur quickly. Once proposed legislation moves through the House, it will then be forwarded to the Senate for Committee. Support in states like Ohio, Kentucky, West Virginia, Colorado, Arkansas, Utah, and Texas is in question.
HORAN will continue to communicate and keep you up to date.
Please contact your HORAN representative with questions.