If you’ve been watching the news lately, you’ve likely seen quite a bit of coverage regarding the new healthcare proposal that will potentially repeal and replace many requirements of the Affordable Care Act (ACA). This new act, the American Health Care Act (AHCA) has been given approval from the U.S. House of Representatives Ways & Means Committee, however it will still require a majority vote in the U.S. Senate. In the meantime, here are a few things about the AHCA that your health plan sponsor needs you to know.
Affordable Care Act Changes
If the AHCA legislation is passed, the Individual Premium Tax Credit will be eliminated beginning in 2020. Penalty to individuals for not having health insurance will be repealed retroactively to January 1, 2016. The penalty to employers not offering health insurance will also be repealed retroactively to January 1, 2016. There will also be simplified reporting in the offering of medical coverage on the W-2. Current 1095-C reporting cannot be completely repealed, however, when the current reporting procedures becomes redundant (Form 1095-C and W-2 reporting simultaneously) and replaced by the W-2 reporting, then the Secretary of the Treasury can stop enforcing the 1095-C reporting. 1095-C reporting will remain a requirement until the Secretary of the Treasury ends the enforcement of the filing requirement.
FSA & HSA Changes
With the passing of the American Health Care Act, the Flexible Spending Account (FSA) annual election limitation will be eliminated as of January 1, 2018, and employers will determine an FSA election limit. For a Health Savings Account (HSA), tax on non-qualified HSA distributions will be reduced back to 10% as of January 1, 2018. The HSA contribution limit will increase to at least $6,550 for a self-only policy and $13,100 for a family policy. It’s important to note that both spouses would be able to make catch-up contributions to a single HSA. In addition, medical expenses incurred within 60 days of high-deductible health plan (HDHP) coverage and establishment of the HSA account could be withdrawn from an HSA account as a qualified medical expense. Finally, over-the-counter medications would be permitted reimbursements under an HSA as of January 1, 2018 (it’s not clear yet if this also applies to FSA and HRA accounts).
With enactment of the American Health Care Act, starting in 2020, the creation of a tax credit made in advance to purchase state-approved health insurance and unsubsidized COBRA coverage to those who are not offered coverage by employer or Medicare or Medicaid will be in place. The credit amount will vary based on age and number of family members, which would replace the current ACA Individual Premium Tax Credit (though it’s not yet determined whether there will be any reporting requirement by an employer for reconciliation of this tax credit). Also with the passing of the AHCA, employer group health plan sponsors will certify COBRA coverage eligible for the credit.
In addition, it will be important to note that annual insurance tax on certain health insurers like Blue Cross Blue Shield would be repealed as of January 1, 2018. Health Reimbursement Arrangements (HRAs) and self-insured plans will also pay this tax (PCORI). Though it’s still not clear if this has also been repealed, but hopefully, the elimination of this tax will improve plan renewals. Finally, the “Cadillac Tax”—the ACA’s high-cost plan tax (HCPT)—would not take effect until January 1, 2025.