As most of you know, Republicans in the U.S. Senate released a draft of their proposal to repeal and replace the Affordable Care Act (ACA), called the Better Care Reconciliation Act (BCRA) on June 22, 2017. The Senate bill closely mirrors the proposal passed in the House of Representatives, the American Health Care Act (AHCA), with some differences. It can be challenging for employers to decipher the ins and outs of what may impact them. We have narrowed it down to five key pieces of the bill that could impact employers.
- Employer and Individual Mandates
Based on the proposed bill, the employer mandate would essentially be eliminated by reducing the penalty for non-compliance to zero dollars. The bill also removes the rule that requires employers to provide employees with health insurance or face penalties. Note that neither the AHCA nor the BCRA would repeal the ACA’s reporting requirements related to the employer and individual mandates (Section 6055 and Section 6056 reporting). The BCRA would also eliminate the individual mandate with no requirement for purchasing or maintaining coverage. These changes would apply retroactively to January 1, 2016. This is a main concern of opposition to the bill as it could create a situation where more healthy people will choose to go uninsured, lowering the spread of risk in the health insurance marketplace and for employer health plans.
- Enhancements to Health Savings Accounts
Health Savings Accounts (HSAs) are tax-advantaged savings accounts that are tied to a qualified high deductible health plan (QHDHP), which can be used to pay for certain medical, dental or vision expenses. These plans continue to rise in popularity and to incentivize use of HSAs, the BCRA (and the AHCA) would:
- Increase the HSA contribution limits to match the maximum out-of-pocket limits.
|Current Contribution Maximum||Proposed Contribution Maximum|
|Employee Only Coverage||$3,400||$6,550|
- Permit both spouses to make catch-up contributions to the same HSA.
- Allow HSA funds to be used for expenses incurred as long as the HSA is established within 60 days of when an individual’s QHDHP coverage begins.
- Authorize over-the-counter (OTC) medication purchases beginning in 2017.
- Decrease the tax on withdrawals from HSAs to pre-ACA percentages, beginning with distributions in 2017.
These changes are all positive for employers currently offering or considering offering HSAs to their employees.
- Essential Health Benefits Could Change
Under the Senate bill, states would be able to define their own essential benefits and allow insurance providers to exclude certain benefits from coverage including things like maternal care and mental health care. Unlimited annual and lifetime benefit maximums would technically be preserved, but states could waive out of these requirements. It would be at a state’s discretion to remove these kinds of coverage. From an employer perspective there is a need to attract and retain workers, and offering competitive benefit plans will still be important.
- “Cadillac Tax” Delay
The Senate Bill would provide relief from many of the ACA’s tax provisions, including a delay of the “Cadillac Tax” provision. The BCRA would postpone the effective date from 2020 to 2026 for the imposed 40 percent excise tax on high cost employer-sponsored health coverage.
- Association Health Plans
Association health plans could be established to operate as large group health plans for small businesses and individuals. These risk-sharing pools would be exempt from the ACA’s community rating and essential health benefit requirements currently imposed on the small group and individual insurance markets. There are more details to be considered, but the small business risk-sharing pool provisions would not become effective until one year after enactment.
Good News for Employers?
From a financial and flexibility perspective, if the BCRA passes it will generally be good news for employers: no mandate to provide coverage, no penalties, enhanced HSAs, more flexibility for essential health benefits, further delay of the “Cadillac Tax” and potential for association health plans. There are still many challenges ahead, though, as the Senate heads back to session next week. It is likely that parts of the BCRA will be challenged and it will likely look different than the bill introduced on June 22.
Employers should be aware of potential new legislation, but until anything is signed into law by the President, the primary focus should be complying with the current ACA legislation. Follow our ACA Watch Page, as we report on this proposed legislation through the Senate vote in the weeks to come.