Two separate bills that make up the American Health Care Act were released in response to a budget resolution passed by Congress on Jan. 13, 2017. The budget resolution is a nonbinding spending blueprint that directs House and Senate Committees to create federal budget “reconciliation” legislation. To become law, budget reconciliation bills must go through the legislative process. However, a budget reconciliation bill is generally filibuster-proof, and can be passed by both houses with a simple majority vote.
A full repeal of the ACA cannot be accomplished through the budget reconciliation process. A budget reconciliation bill can only address ACA provisions that directly relate to budgetary issues—specifically, federal spending and taxation. A full repeal of the ACA must be introduced as a separate bill that would require 60 votes in the Senate to pass.
Debate on the American Health Care Act began on March 8, 2017. To address concerns raised by both Democrats and fellow Republicans, the House Republican leadership released amendments to the legislation on March 20, 2017, followed by a second set of amendments on March 23, 2017. The House vote was originally expected to take place on March 23, 2017, but was delayed for one day, until March 24, 2017.
Following the announcement that the House vote would be delayed, President Trump stated that he would not continue to pursue an ACA repeal if the House could not pass this legislation. As a result, the ACA will remain in place at this time. However, Congress may choose to pursue their own ACA repeal and replacement in the future.
The majority of the ACA would not have been affected by the new legislation. For example, the following key ACA provisions would remain in place:
Age rating restrictions would also continue to apply, with the age ratio limit being revised to 5:1 (instead of 3:1), and states would be allowed to set their own limits.
The ACA imposes both an employer and individual mandate. The American Health Care Act would have reduced the penalties imposed under these provisions to zero beginning in 2016, effectively repealing both mandates (although they would technically still exist).
However, beginning with open enrollment for 2019, the American Health Care Act would have allowed issuers to add a 30 percent late-enrollment surcharge to the premium cost for any applicants that had a lapse in coverage for greater than 63 days during the previous 12 months. The late-enrollment surcharge would then be discontinued after 12 months.
The ACA currently offers federal subsidies in the form of premium tax credits and cost-sharing reductions to certain low-income individuals who purchase coverage through the Exchanges. The American Health Care Act would have repealed both of these subsidies, effective in 2020, and replace them with a portable, monthly tax credit for all individuals that could be used to purchase individual health insurance coverage.
The American Health Care Act would have also repealed the ACA’s small business tax credit beginning in 2020. In addition, under the Act, between 2018 and 2020, the small business tax credit generally would not be available with respect to a qualified health plan that provides coverage relating to elective abortions.
HSAs are tax-advantaged savings accounts tied to a high deductible health plan (HDHP), which can be used to pay for certain medical expenses. To incentivize use of HSAs, the American Health Care Act would have:
The American Health Care Act would have provided relief from many of the ACA’s tax provisions. The amendments made to the Act would have accelerated this relief by one year for most provisions, moving the effective dates for repeal up to 2017.
The affected tax provisions would have included the following:
Beginning after Dec. 31, 2016, the new law would have also repealed the medical devices excise tax, the health insurance providers fee and the fee on certain brand pharmaceutical manufacturers. The 10 percent sales tax on indoor tanning services would have been repealed effective June 30, 2017, to reflect the quarterly nature of this collected tax. Finally, it would have also reduced the medical expense deduction income threshold to 5.8 percent (lower than the pre-ACA level of 7.5 percent), beginning in 2017.
The American Health Care Act would have repealed the ACA’s Medicaid expansion, and made certain other changes aimed at modernizing and strengthening the Medicaid program. The amendments to the Act made a number of modifications to the proposed Medicaid changes. For example, the new law would have provided enhanced federal payments to states that already expanded their Medicaid programs, and then transitioned Medicaid’s financing to a “per capita allotment” model starting in 2020, where per-enrollee limits would be imposed on federal payments to states. It would have also allowed states the option to implement a work requirement for nondisabled, nonelderly, non-pregnant adults as a condition for receiving Medicaid coverage.
The legislation would have also modernized Medicaid’s data and reporting systems, repealed the ACA’s disproportionate share hospital (DSH) cuts and made changes to the process for eligibility determinations.
On March 13, 2017, the CBO issued a cost estimate report on the American Health Care Act. In this report, the CBO estimated that enacting the legislation would:
This report had caused some concern among both Democrats and fellow Republicans in approving the legislation. The amendments made by House Republican leadership were intended to address these concerns.
Because the House was unable to pass the American Health Care Act, the ACA remains current law, and employers must continue to comply with all applicable ACA provisions. Both President Trump and House Republican leadership have stated that they now intend to focus on other issues. Despite this, Congress may choose to pursue their own ACA repeal and replacement in the future.
This ACA Compliance Bulletin is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Readers should contact legal counsel for legal advice. To download the bulletin, click HERE.
© 2017 Zywave, Inc. All rights reserved.
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