House Passes AHCA Bill – What This Means for Employer Compliance

Summary:

  • AHCA bill passed in the House of Representatives
  • Senate will now take up the bill, and many have said publicly that it will have significant changes and potential poison pills added that would keep it from ever becoming law.
  • Individual and Employer mandate penalties go to $0 as of 12/31/2015.
  • ACA Reporting stays in tact as is, with the addition of new additional reporting as of 1/1/2018.
  • Definition of what plan can receive a subsidy or tax credit has changed.
  • Subsidies will be replaced with tax subsidies in 2020.

On May 4, 2017 the US House passed the latest iteration of the American Healthcare Act (AHCA), a reconciliation bill aimed at repealing and replacing the ACA. The next step is for the bill to be sent to the Senate, where it is already facing harsh criticism.

The Senate is expected to take on an even slower pace as many members are saying that they need “plenty of time to look things over”. Thus far many Republican Senators have expressed concern over the substance of the new plan. Some noteworthy statements are as follows:

“We’re not under any deadline, so we are going to take our time” – Sen. John Cornyn (R-TX)

“I’m not so sure this is good civics here” – Sen. Lindsey Graham (R-SC)

“The Margin of error is a lot less over here” – Sen. John Thune (R-ND)

“Anything that makes it impossible for us to do under reconciliation we’ll have to either try to do it a different way or do it at a later time” – Sen. Roy Blunt (R-MO)

“It’s a skeleton, but it’d definitely still not the final product” – Sen James Lankford (R-OK)

Senators Lindsey Graham (R-SC), Shelley Moore-Capito (R-WV) and Johnny Isaakson (R-GA), are co-sponsoring an earlier bill that was authored by Sen. Susan Collins (R-ME) and Sen. Bill Cassidy (R-LA). This bill takes an entirely different approach than that of the house. It has language that allows states to either keep the current ACA law’s framework or opt into a new program that would enroll people into a catastrophic insurance plan that would be paid for through the use of tax credits.

The most important items that the House Freedom Caucus negotiated in order to pass the latest bill, such as the opting out of Essential Health Benefits, are possibly unallowable in Senate Reconciliation rules. This seems to be the case as all items must concern the budget and not regulation, something Dems are sure to bring up at large.

Senators Chuck Grassley (R-IA) and Roy Blunt (R-MO), think that the Senate might write its own bill from scratch and disregard the latest House bill. Additionally, unlike the house, the Senate must receive and review a score from the Congressional Budget Office (CBO) before a vote of any kind. It’s expected to take two weeks for this to occur.

At this point it is uncertain what the revised Senate bill will look like, but we do know that it will undergo an overhaul. New developments will surface on a daily basis which makes it difficult to determine exactly what this means for Employer Compliance and Reporting going forward. Assuming no changes occur to the bill (which we know they will) this is what we know so far………

  • Sec 205, 206Individual Mandate and Employer Mandate Penalties for offering health coverage will go to $0.00 after Dec 31, 2015. This does not address any penalties that may be incurred for the 2015 plan year prior to Dec 31, and from all accounts the IRS is planning on implementing penalties for the 2015 plan year. More on that here.
  • Sec 205, 206 – While taking the Mandate penalties to $0.00, the IRS reporting penalties associated with the filing of “Informational Returns” are assumed to stay the same. Changes to the reporting requirement for large employers are not mentioned in the bill and are also assumed to stay “as is”.
  • Sec 131Repeal of Subsidies. The cost sharing subsidies created by the ACA are not to be repealed until December 31, 2019 to allow for transition. The government will need to know who is eligible for a subsidy for 2017, 2018 and 2019. That means employers will need to report coverage offered. After this, ongoing reporting will still be needed to track Tax Credits.
  • Sec 202 Additional Modification to Premium Tax Credits under ACA. This would go into effect after Dec, 31 2017 (which excludes this reporting year) and would no longer be allowable for insurance that covers abortions. These would additionally now be indexed based on “age” and “income” which would substantially decrease credits available for younger tax payers.
  • Sec 202Change to the definition of “Qualified Health Plan”. Qualified health plans look to exclude both MV requirements as well as indexing.
  • Sec 202 – Reporting Under Section 6055(b). New reporting for information relating to Off-Exchange Premium Credit Eligible Coverage. New requirements will be effective as of Jan 1, 2018 with regard to newer Premium Credits.

No-one yet knows when the senate will enact a new law or even what that law will look like. It may be late Summer to early Fall before we know anything. At that point changing the reporting requirement for the tax year 2017 will not be possible. So it is expected that 2017 reporting requirements will stay as they currently are. If the law passes in its current form, the mandate penalties will be eliminated, but that does not affect the penalties associated with failure to file informational returns. This affects the exchanges, the Insurance Carriers and Applicable Large Employers (ALEs).