On May 4, the House of Representatives passed the American Health Care Act, (AHCA), which is aimed at repealing and replacing portions of the Affordable Care Act (ACA). While many of the changes do not affect employer-sponsored coverage, there are several changes in the bill that are likely to be of interest to employers.
In particular, the AHCA would make the following changes directly affecting employer-sponsored plans:
- Eliminate Employer Mandate Penalties – While it would not eliminate the employer mandate, the AHCA would reduce to zero the potential penalties on large employers (with 50 or more full-time equivalent employees) that fail to offer affordable, “minimum value” health care coverage to employees working 30 or more hours per week. However, the AHCA would not repeal the Form 1095-C and 1094-C reporting requirements for large employers and self-insured plan sponsors (for more information on these requirements, see our post on November 8, 2016).
- Further Delay the “Cadillac Tax” – The bill would further extend the delay of the proposed tax on high-cost health plans. The tax is currently delayed to 2020, and under the AHCA would not take effect until 2026.
- Remove Restrictions on FSAs – The bill would permit flexible spending accounts (FSAs) to reimburse over the counter medications without a prescription, and would remove the $2,600 limit on FSA contributions that was added by the ACA – essentially reverting back to pre-ACA rules for FSAs.
- Increase Contribution Limits and Other Changes to HSAs – The AHCA would increase the limits on contributions to health savings accounts (HSAs) up to the in-network out of pocket limit. It also would reduce penalties on non-medical distributions from HSAs from 20% to 10%, and would permit reimbursement of over the counter medications without a prescription. The bill also would add other enhancements to HSAs, such as permitting two spouses to both make catch-up contributions to one HSA.
- Add W-2 Reporting Requirement – The bill would amend the Form W-2 requirements to provide that the W-2 report each month in which the employee is eligible for group health plan coverage in connection with employment (but would not specifically require similar reporting for dependents).
Other aspects of the AHCA don’t directly address employers but could affect employer-sponsored coverage and reporting:
- Potential Additional Flexibility in Determining EHBs – The ACA identified a list of 10 categories of “essential health benefits” (EHBs). Self-insured plan sponsors may not impose annual or lifetime limits on EHBs, but can pick which state’s EHBs serve as a benchmark for their plans. The AHCA would permit states to opt out of the standard EHBs and identify their own. It’s unclear whether this means that employers sponsoring self-insured plans could opt to benchmark their plans against the EHBs of an opting-out state, thereby allowing them to place annual or lifetime limits on benefits that would otherwise be considered EHBs.
- Continuous Coverage Requirement – The ACA eliminated pre-existing coverage exclusions and the related requirement that group health plans provide participants with certificates of creditable coverage in order to avoid such exclusions. While the AHCA would not reinstate the exclusions, it would allow plans to charge participants more for pre-existing conditions if they don’t meet continuous coverage requirements. This could mean reinstating the requirement that employers issue certificates of creditable coverage, although the bill also contemplates that this may be addressed through some other form of reporting to be specified in regulations.
The AHCA, as passed by the House, is currently under review in the Senate, and it’s likely that there will be at least some changes to the bill from its current form. In addition, it’s worth noting that while the AHCA makes numerous changes to the ACA, other aspects of that law will remain in place even if the AHCA were to be passed in its current form.