Late Monday, March 6, 2017, Republicans released the latest version of their PPACA repeal and replacement legislation. The proposed legislation, called the American Health Care Act, was circulated by the House Ways and Means and Energy and Commerce committees, the two committees with primary jurisdiction over health care.
The proposed legislation is expected to be introduced on the House floor on Wednesday, March 8, as a budget measure, making it eligible for passage through Congress via the so-called budget reconciliation process (meaning it would need only 51 votes to pass). As for a summary of the major points, the proposed legislation:
- Repeals PPACA’s individual and employer mandate tax penalties for 2016 and beyond.
- Repeals PPACA’s health insurance tax for 2017 and beyond (the tax is currently suspended for one year only in 2017).
- Keeps PPACA’s Cadillac Tax, but delays its effective date until 2025.
- Repeals the limitations on employee salary reduction contributions to health FSAs beginning in 2018.
- Allows over-the-counter (non-prescription) medications to be paid/reimbursed through health FSAs, HRAs and HSAs, beginning in 2018.
- Increases the HSA contribution limits to match the out-of-pocket maximums under an HDHP and allows both spouses to make catchup contributions to one HSA, beginning in 2018.
- Allows HSA reimbursements for certain expenses incurred prior to the establishment of the HSA (e.g., where an employee has enrolled in an HDHP, but has not yet established their HSA), beginning in 2018.
- Repeals PPACA’s small business health insurance tax credit beginning in 2020.
- Repeals PPACA’s premium tax credit (PTC) system beginning in 2020. In the meantime, the Act expands the use of PTCs by allowing individuals to use a PTC for the purchase of catastrophic-only health plans (sold on and off the exchanges), but requires a recapture of excess advance payments of PTCs (e.g., where an individual’s household income increases during the tax year) for 2018 and 2019.
- Creates new refundable tax credits (amount based on age) for the purchase of state-approved health insurance and unsubsidized COBRA coverage for those who don’t have access to employer or governmental coverage. The credits are payable in advance (to allow individuals to use them at the time of purchase), are capped and also phase out for those with higher incomes.
- Phases out PPACA’s Medicaid expansion and replaces it with an overhauled system that caps payments to states based on Medicaid enrollment.
- Keeps PPACA’s pre-existing condition exclusion prohibitions, but allows insurers to charge higher premiums (up to 30 percent more) to those who let their coverage lapse.
- Creates a new “Patient and State Stability Fund,” which gives states money and flexibility in addressing the needs of small group plans and high-risk individuals in each state (through a state-based high risk pool, for example).
Importantly, because employer reporting isn’t considered a budget item, it isn’t included in the legislation. That said, fact sheets and congressional reports suggest that the federal agencies (HHS, IRS and DOL) could choose to streamline those reporting processes (by allowing employers to report offers of coverage on a Form W-2, for example) or not enforce the current reporting requirements or penalties (pursuant to President Trump’s executive order on PPACA non-enforcement). For similar reasons (i.e., non-budgetary items), the legislation doesn’t appear to impact PPACA’s preventive care, dependent coverage up to age 26 and other provisions (e.g., PCOR fee and state-based exchanges, although there won’t be premium tax credits after 2020). It remains to be seen how those non-budgetary PPACA provisions will be handled.
Lastly, the proposed legislation doesn’t include any repeal or cap on the employee tax exclusion for employer-provided health insurance benefits — a provision most thought would be included to help fund the replacement plan.
The proposed legislation is not yet law. Most expect more debate and change over the next few weeks and months as the proposed legislation works its way through Congress. We’ll continue to monitor developments and provide updates as we move forward.