The House yesterday, on May 4, 2017, passed by a 217-213 vote, the measure referred to as the American Health Care Act (“Trumpcare”), which is intended to repeal and replace the Patient Protection and Affordable Care Act (“Obamacare”). While the bill faces an uncertain fate in the Senate, the Trump administration now has a platform for its repeal-and-replace efforts. Without the passage of this bill, those efforts may well have been stalled indefinitely, and may even have been in danger of being scuttled altogether.

Key changes to Obamacare under the House bill include:

  • Removal of the employer and individual mandates (effective back to 2016) - these are the penalties imposed on employers for failure to offer health coverage or coverage that is affordable and meets the minimum requirements and the penalties on individuals for failure to maintain health coverage that meets minimum requirements.

  • Replacement of the general prohibition on excluding coverage for pre-existing conditions in the individual marketplace (beginning in 2019) with a premium surcharge of 30% for first 12 months of coverage after a break in coverage of 63 or more days in the prior year.

  • Allocation of US$8 billion over five years to help fund high-risk pools in states that opt out of existing protections on pre-existing conditions to assist in lowering the cost of coverage for those individuals with pre-existing conditions - arguably the key late-breaking change to the evolving legislation that ultimately led to the House passing the bill.

  • Further delay of the “Cadillac tax” until 2026 - this is the tax levied in respect of certain plans that are considered to be "rich" plans.

  • Permit states to waive certain of the Obamacare mandates including coverage of the 10 “essential health benefits” that are considered to cause increased premium costs - this would allow states to set required coverage packages on a state-by-state basis.

  • Addition of refundable tax credits (US$2,000/year to US$4,000/year depending on age with a cap of US$14,000 per family) - these would replace Obamacare’s premium tax credits.

  • Reverting back to the 10% tax on withdrawals from health savings accounts (“HSAs”) that are unrelated to medical expenses - Obamacare had increased this tax to 20%.

  • Elimination of the dollar limit on contributions to healthcare flexible spending accounts ("FSAs") - Obamacare has imposed a US$2,500 limit (subject to cost of living adjustments).

  • Increase in the annual HSA contribution limits (effective January 1, 2017) - individual contribution limits would increase from US$3,400 to US$6,550 and family contribution limits from US$6,750 to US$13,100.

  • Permitting FSAs, HSAs and health reimbursement accounts to reimburse the cost of over-the-counter medication without a prescription - such reimbursements are not currently permitted.

We will continue to monitor the American Health Care Act as it continues to evolve. If you have questions about how these proposed changes will impact your employer-sponsored group health plan, please contact one of the Dechert lawyers listed below.