There has been much in the news regarding the proposed American Healthcare Act that is currently making its way to the House for a vote. Proponents think it is the answer to issues people have had with the Affordable Care Act (Obamacare). Critics are concerned it either does not go far enough to repeal the Affordable Care Act and/or it may result in higher costs and loss of coverage.
So, let’s take a look at what the American Healthcare Act, as it stands today, does NOT change. The AHCA maintains the following requirements:
- Coverage for pre-existing conditions
- Dependent child coverage up to the age of 26
- Caps on out of pocket expenses
- No lifetime or annual benefit limits
- Guaranteed availability and renewability of health plans
- No underwriting based upon health status
- Employer and insurance company reporting requirements
- First-dollar coverage for preventive care services
However, there are some significant changes that the AHCA does propose. These include reductions to funding for Medicaid expansion and Planned Parenthood as well as the creation of a fund to help states cover the costs of their high risk populations (Patient & State Stability Fund). Additionally, there several key items in the AHCA that impact both individuals and employers who purchase health insurance.
Individual Health Insurance
The proposed legislation is being submitted under the budget reconciliation process which will allow it to pass with only a simple majority vote. However, that means that it can only address “budget” items. Therefore, what the AHCA can do is to reduce the penalty for not having insurance, to $0. The AHCA does not repeal the requirement that individuals have health insurance (Individual Mandate). This change would take place for 2016. While there would be no penalty for not buying insurance, the AHCA would institute a premium surcharge of 30% for policies purchased if the individual had a gap in coverage of more than 63 days.
One of the major points of argument is the repeal of the premium tax credit that is now available to low-income individuals and the cost sharing reductions that are available to reduce the deductibles and other out of pocket costs for those who qualify. Under the proposed legislation, these would be repealed in 2020. In the meantime, they would continue and could be used to purchase catastrophic plans and other plans outside the Marketplace Exchanges as long as those plans did not provide coverage for abortions.
The AHCA does institute an age based tax credit for the purchase of health insurance by those who are not offered insurance by their employer. The credit ranges from $2,000 to $4,000 and is not adjusted for geography or the varying costs of insurance in different parts of the country. It is also not adjusted for incomes up to $75,000 as an individual or $150,000 for joint filers. The credit would be reduced by $100 per every $1,000 in income above those levels.
Employer Sponsored Group Health Insurance
As is the case with the Individual Mandate, the Employer Mandate would be not be repealed under the proposed AHCA for the same reason. However, the penalty imposed on employers with 51 or more employees, who do not offer affordable health insurance, would be reduced to $0. This would NOT, however, remove the reporting requirements that large employers have had to tackle for the last few years.
Small employers would lose the small business tax credit under the AHCA. The metal level plan categories of Platinum, Gold, Silver and Bronze would be eliminated in 2020. However, the community rating would remain.
The AHCA would remove the $2,600 limit that is imposed on Flexible Spending Accounts (FSAs). Employers would still be able to impose their own limit. Health Savings Account (HSA) contribution limits would be increased to $6,550 for individuals and $13,100 for family coverage. Additionally, the tax penalty imposed on distributions from an HSA that are for non-qualified expenses would be reduced. Furthermore, the Cadillac Tax which under the Affordable Care Act would add a 40% tax on higher cost plans as of 2020, would be delayed (not repealed) under the AHCA until 2025.
Several taxes imposed by the Affordable Care Act would be repealed under the American Health Care Act. These include but are not limited to the following:
- 10% indoor tanning tax
- Branded prescription drug tax
- Medical device excise tax
- Medicare tax imposed on unearned income for individuals earning in excess of $200,000
- Health Insurance tax
For now, everyone should keep in mind that NOTHING HAS BEEN PASSED. Employers and individuals should continue to comply with the Affordable Care Act. We expect that the proposed legislation will be modified and amended. We will continue to monitor the changes as they occur.
Information about the Author: Carolyn Robbins is a Senior Benefits Consultant at Insurance Associates, a Marsh & McLennan Agency LLC Company with more than 28 years of experience helping companies of all sizes design, implement and maintain quality employee benefit programs. Her extensive knowledge of the industry enables her to assist her clients with cost-cutting strategies, employee communications, claims analysis, renewal negotiations and regulatory compliance. Carolyn graduated from Bucknell University with a Bachelor of Science in Business Administration and has achieved the Health Insurance Associate designation from the Health Insurance Association of America.