Unless you are living under a rock, by now you know that on May 4, 2017, the U.S. House of Representatives took a tentative first step in repealing President Obama’s signature piece of legislation, the Patient Protection and Affordable Care Act (PPACA), by passing the American Health Care Act (AHCA). Since then, it has been widely reported that the U.S. Senate will review, study and modify the AHCA before taking a vote and may even start from scratch with its own bill. Therefore, it is anyone’s guess as to what any fully enacted legislation to repeal, repair or replace PPACA will look like.
Regardless, I have consulted my Magic 8 Ball and my crystal ball and the following are a few of my thoughts.
Health Savings Accounts (HSAs)
The Republican proposals to repeal, repair and replace PPACA, including the AHCA, all include some expansion of HSAs. The AHCA provides that beginning in 2018:
• The maximum HSA contribution amount (currently $3,400/self or $6,750/family) is increased to equal the maximum out-of-pocket maximum (currently $6,550/self and $13,100/family).
• If both spouses are eligible to make catch-up HSA contributions, both spouses can make catch-up HSA contributions to the same HSA.
• If an HSA is established within 60 days of the date an individual begins high deductible health plan coverage, qualified medical expenses incurred during the period of high deductible health plan coverage are reimbursable tax-free from the HSA – even if the expenses are incurred before the HSA is established.
Additionally, beginning in 2017, the penalty tax for using HSA funds for non-medical purposes decreases from 20 percent to the pre-PPACA level of 10 percent.
Any expansion of HSAs could be a good thing for employers who are looking for stability and predictability in their medical plan spend. Expanded HSAs, coupled with a stable private marketplace for medical insurance AND a loosening of the restrictions on the use of HSA funds to purchase private insurance, could result in a win-win for employees and employers. Employees would have the flexibility to purchase the medical insurance coverage that is most suited to their family needs and, I’ll say it again, employers would have the much needed stability and predictability in their medical plan spend.
Mandatory Employer Reporting
Mandatory employer reporting is here to stay, but it might change. As with the expansion of HSAs, the Republican proposals relating to health care reform all make attempts to eliminate the cumbersome Form 1095-C/1094-C mandatory employer reporting along with the employer and individual coverage mandates. However, in order to determine which individuals are eligible for health care assistance, in whatever final form it takes, one requirement that is consistent among the proposals is determining whether the individual has a qualifying offer of coverage from an employer. The best source for this information is the employer. The AHCA provides that this reporting will be done via the Form W-2.
While many employers will rejoice if Form 1095-C/Form 1094-C reporting is eliminated, the rejoicing may be short lived. As the elimination of the reporting is coupled with the elimination of the employer and individual mandates, the health care reform legislation is left without one of its most significant sources of funding. Therefore, it seems likely that Congress will look for another funding source. While the Trump administration and the Republican congressional leadership have signaled that elimination of the employer deduction for health care is not on the table, one has to wonder whether that is really true. The employer deductions for health care and retirement plans are two of the largest sources of lost revenue for the federal government and the tax proposals floating around Washington seem to suggest that retirement plan deductions are on the table. This leads me to believe that the health care deductions are also on the table.
More State Control
In order to stabilize the current state marketplaces (state exchanges), many believe that any coverage mandates should be made at the state and not the federal level. This is seen in the AHCA which, in certain cases, allows states to (1) determine their own definition of essential health benefits and (2) request waivers of community rating standards. While this may go a long way toward providing individuals choice in the marketplace and reducing the overall cost of health insurance, these changes could be detrimental to employers. Employer plans are not likely to be subject to the same flexibility. Therefore, employers who offer health plan coverage may find high-risk individuals more likely to stay in their employer-provided coverage longer, which of course results in high claims cost and experience.
This brief article only scratches the surface of the AHCA and the future of health care reform legislation. Of course, it remains to be seen what, if anything, is passed by Congress and signed into law by President Trump. Therefore, unless and until anything is passed, signed into law and becomes effective, employers should stay the course and continue to comply with the applicable provisions of PPACA, which remains the law of the land.