How Will the Proposed AHCA Be Different From the ACA for Employers?

American Health Care Act

The Republican health-care proposal, the American Health Care Act, includes a number of provisions that would modify or repeal parts of the Affordable Care Act. 

The bill, which narrowly passed the House Budget Committee (19-17) March 16, is moving on to the House Rules Committee, which is expected to put the bill onto the House floor next week. 

If signed into law as-is, the American Health Care Act will introduce significant changes to how employers comply with health care regulations. (See related story, ACA Employer Compliance: Changes in 2017 Looming). 

The Congressional Research Service published a report analyzing the American Health Care Act.  The March 14 report compares sections of the Affordable Care Act with the sections of the American Health Care Act that would either modify or repeal it.  

Employer Mandate: The AHCA would eliminate penalties imposed on employers with at least 50 full-time equivalent employees when one or more of their full-time employees obtains a premium tax credit through a health insurance exchange. The elimination would be retroactive to 2016.

Cadillac Tax:  The AHCA would delay implementation of the ACA’s so-called Cadillac Tax, the 40 percent excise on tax high-cost employer-sponsored health plans, until 2025. Initially set to go into effect in 2018, implementation of the pro rata 40 percent tax on plans exceeding $10,200 for individual coverage and $27,500 for family coverage was delayed until 2020 by a 2015 funding bill (Pub. L. No. 114-113).  (See related story, Junking Cadillac Tax Still High on Employers’ Wish List.

Flexible Spending Accounts: The AHCA would repeal the ACA’s maximum contribution of $2,500 to a health FSA that is part of a cafeteria plan as soon as tax year 2017.  The AHCA also would repeal the tax on over-the-counter-medication without a prescription, allowing cafeteria plan participants to purchase over-the-counter medication with health FSA funds.  

Health Savings Accounts: The AHCA would reduce the applicable tax rate on HSA distributions not related to health care from 20 percent (under the ACA) to 10 percent. The AHCA would also increase the annual contribution limit for HSAs to match the out-of-pocket limits for HSA-qualified high-deductible health plans (from 2017 limits of $3,400 for self-only coverage and $6,750 for family coverage). Finally, the AHCA would not require married couples making HSA catch-up contributions to take their spouses’ contributions into account. 

Health Insurance Tax: The AHCA would repeal the fee on certain health insurers that is currently suspended for 2017 but set to apply again beginning in 2018. 

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