On Sept. 26, 2017, Senate Majority Leader Mitch McConnell announced that the Senate would not be holding a vote on the Graham-Cassidy plan, due to dwindling support. Senators Lindsey Graham (R-SC) and Bill Cassidy (R-LA) unveiled a revised version of their legislation to repeal and replace the PPACA in hopes of winning a few more votes, before the reconciliation clock ran out on Sept. 30, 2017. Those hopes were dashed when a preliminary Congressional Budget Office (CBO) report said that the proposed bill would result in millions fewer people having comprehensive health insurance and when pivotal Republican senators declared their opposition.
As background, most of the changes in the bill affected the individual and small group market, making only slight changes to the large group market. Specifically, the bill would have eliminated the employer mandate penalties (also likely impacting employer reporting requirements, at least in terms of simplification), without a corresponding change to the employer-sponsored coverage tax benefit. Most employers would have likely approved of the changes made to HSAs, as described more fully below. However, the chances of passage quickly became a long shot with several key Republican senators voicing their opposition to the bill. As a quick reminder, the Senate was using the budget reconciliation process to pass the bill (thereby only needing 50 votes, which is 10 votes less than would generally be required to pass a bill). Additionally, the provisions of a reconciliation bill generally must relate to or influence the budget, meaning they drive or otherwise impact federal revenue.
To recap, the Graham-Cassidy bill would have made the following changes to HSAs:
- Eliminate the prohibition on over-the-counter drugs as qualified medical expenses
- Raise the contribution limit to the out-of-pocket cost for high deductible health plans
- Allow spouses to make catch-up contributions to the same HSA
- Reverse the PPACA’s tax penalty increase on HSAs for non-qualified expenditures, taking it down from 20% to 10%
- Allow payments for qualified medical expenses of dependents through age 26
- Allow payment of HDHP premiums up to certain amounts and only if the HDHP doesn’t cover abortions
With respect to PPACA fees and taxes, this bill didn’t go as far as previous House and Senate proposals. Graham-Cassidy would have repealed only the medical device and elimination of the deduction for Medicare Part D subsidy expenses, but the Cadillac tax remained.
Additionally, the bill contained various other notable reforms for the individual and small group markets, including an elimination of the premium tax credits and cost-sharing subsidy program beginning in 2020, and a phasing out of the small business tax credit by 2020.
Finally, the Graham-Cassidy bill proposed to expand the scope of state waivers to allow a state to override the PPACA requirements with respect to essential health benefits, cost-sharing requirements and annual limits rules, actuarial value standards, age rating bands in the individual and small group markets, and coverage of preventive health services, among other things.
The defeat of the Graham-Cassidy bill means we’re all left with many questions, including: Will President Trump sign an executive order allowing Americans to purchase health care across state lines? Can Congress garner bipartisan support for market stability legislation? Will the PPACA repeal and replace efforts make their way into tax reform?
As always, we’ll continue to watch for future developments that affect employers and their health care plans. Please contact your advisor with any specific questions on employee benefits compliance.