GOP healthcare reform bill: Essential guide for employers
Republicans’ legislative proposal to “repeal and replace” Obamacare has arrived, and employers now have an idea what a future without the Affordable Care Act (ACA) might look like.
But before digging into the essentials of the 57-page bill, dubbed “The American Health Care Act,” it’s worth noting that this is just an initial proposal. This bill is likely to undergo some changes before it’s brought before the House and Senate for a vote.
Still, it’s the clearest picture employers have seen yet as to what GOP-crafted healthcare reform may look like in the years ahead.
Employer and individual mandates …
The bill calls for the immediate repeal of the employer and individual mandates.
There were already signs coming out of the new administration that enforcement of the individual mandate was on very thin ice, and if this bill were to pass as is, the mandate would be as good as dead — along with the employer mandate to provide employees with “minimum essential coverage” or pay a non-compliance penalty.
The repeals would apply for months beginning after Dec. 31, 2015. That would mean that large employers (those with 50 or more full-time employees), who failed to offer a health plan to their employees in 2016, would not be subject the $2,000 or $3,000 per-employee mandate penalties.
Individuals who failed to maintain continuous coverage in 2016 would also not be subject to a shared-responsibility penalty.
However, the general thinking is that there needs to be some incentive for younger, healthy individuals to sign up for insurance to keep the costs down. As a result, the GOP bill would create a 12-month look-back period to determine if an individual went longer than 63 days without continuous health insurance coverage. If an individual went without coverage for longer than 63 days, an insurer would be allowed to charge the person a 30% premium surcharge for coverage for an entire year when the person signs up for coverage. This look-back period would begin in 2019.
Popular ACA provisions stick
The American Health Care Act would keep some of the more popular provisions of the ACA intact, such as:
- the prohibition on lifetime and annual coverage limits
- the prohibition on denying coverage to those with pre-existing conditions, and
- the mandate to allow children up to the age of 26 to remain on their parents’ health plans.
The GOP proposal would also keep the essential health benefits provisions of the ACA (except with respect to Medicaid plans), which require health plans to cover 10 categories of healthcare services, which include:
- Ambulatory patient services
- Emergency services
- Hospitalization
- Maternity and newborn care
- Mental health and substance use disorder services
- Prescription medications
- Rehabilitative and habilitative services and devices
- Lab services
- Preventive and wellness services and chronic disease management, and
- Pediatric services, including oral and vision care.
Don’t be surprised if the essential health benefits rule is something that gets tinkered with before the legislation gets put up for a vote.
The legislation would also loosen the rules on how much more insures can charge older individuals than younger ones. The ACA limited the cost of the most generous plan for older Americans to three times the cost of the least generous plan for younger Americans. The new ratio under the GOP bill would expand the gap to five times the cost of a plan for younger Americans.
No more subsidies, but …
The bill would wave goodbye to Obamacare’s subsidies that help individuals, who don’t receive an offer of ACA-qualifying coverage from their employer, pay for insurance on the open market.
But the subsidies would be replaced with an advanceable, refundable tax credit for the purchase of state-approved, major medical health insurance.
Under the ACA, individuals’ subsidies are based on their income levels, whereas the GOP plan would base the tax credits mostly on age.
Example:
- An individual under 30 would get a $2,000 credit
- Someone between 30 and 39: $2,500
- Someone between 40 and 49: $3,000
- Someone between 50 and 59: $3,500, and
- Someone over age 60: $4,000.
The credits would rise for a family and be capped at $14,000. The credits would be tied to the Consumer Price Index and grow over time. They’d be available in full to those making $75,000 per year ($150,000 for joint filers). But they’d phases out by $100 for every $1,000 in income higher than those thresholds.
‘Cadillac’ to get restarted
The ACA’s 40% excise tax on the value of high-end health insurance plans, which appeared to be running on fumes, would get new life under the GOP proposal.
The legislation would keep the tax to help pay for reforms, although it would not take effect until 2025.
ACA taxes would go
The bill would repeal a number of ACA taxes, such as:
- the tanning tax
- the medical device tax
- the tax on over-the-counter medications, effective 2018 (Note: The ACA excluded over-the-counter medications from the definition of qualified medical expenses under tax-advantaged savings accounts.), and
- the tax increase on health savings accounts, effective 2018 (Note: The ACA increased the percentage of the tax on HSA and Archer MSA distributions not used for qualified medical expenses to 20%. The tax would revert back to pre-ACA levels.).
FSAs, HSAs would get beefed up
The bill would bolster individuals’ savings options under tax-advantaged plans by:
- repealing limitations on contributions to flexible savings accounts — the GOP plan would repeal the ACA-imposed $2,500 limit on contributions to flexible spending accounts (FSAs)
- increasing the maximum contribution limit to health savings accounts (HSAs) — the limit would now equal the sum of the annual deductible and out-of-pocket expenses permitted under a high-deductible health plan — thus, the basic limit would be at least $6,550 in the case of self-only coverage and $13,100 in the case of family coverage, and
- allowing both spouses to make catch-up contributions to one HSA.
These provisions would take effect in 2018.
Metal levels gone
The GOP plan would end the actuarial and metal level requirements of the ACA as of Dec. 31, 2019. The idea behind the metal levels was to help consumers comparison shop.
The rule mandated that health insurance plans meet one of four “metal” levels of coverage based on actuarial value: bronze, silver, gold ot platinum.
The actuarial value is the percentage (on average) of the total cost of care a plan will cover. For example: If a plan has an actuarial value of 80%, an individual under that plan would be responsible for 20% of the cost of his or her care.
The actuarial values are as follows:
- A bronze plan will cover 60% of care costs
- A silver plan will cover 70%
- A gold plan will cover 80%, and
- A platinum plan will cover 90%.
The repeal of actuarial and metal level requirements would allow insurers to sell plans with actuarial values of less than 60%. However, the maximum out-of-pocket limit in the ACA would remain intact.
Medicaid funding changes
The bill would restructure the funding of the Medicaid program to a per-capita cap.
In other words, the Medicaid expansion under the ACA would be phased out by 2020. Instead, states would receive a set dollar amount for each person.
There would also be variations in the funding amounts based on an individual’s health status.
These provisions are explained in greater detail, here.
Info: Here’s a general info page on the bill provided by the House Ways and Means Committee.
