May 16, 201701:12 PMOpen Mic
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What employers need to know about the American Health Care Act
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On May 4, the House of Representatives narrowly passed legislation known as the American Health Care Act (ACHA) to repeal and replace major parts of the Affordable Care Act (ACA). Nonetheless, the future of the ACHA was immediately put in doubt when both Republican and Democratic members of the Senate rejected the bill outright, and several Republican senators began work on an entirely new version of the bill the very next day.
Much of the initial public reaction surrounding the ACHA centers on issues such as the proposed cuts to Medicaid, the risk of higher premiums for those with pre-existing conditions, the likelihood of increasing premiums for older Americans, and the scope of “essential health benefits” that insurance plans must cover, pursuant to the ACA.
There are, however, a number of proposals that are worth understanding now and following in the future, especially by employers and human resource managers. Although the ACHA faces a long legislative road, it is likely that at least some of the provisions included in the ACHA will be included in a final version of the law and may affect employer-sponsored health plans.
Here is a comparison between some of the key provisions that exist under the ACA and the changes proposed to it by the ACHA:
Elimination of the individual mandate penalty — Under the ACA, most individuals are required to purchase health insurance or pay a penalty. The ACHA reduces the penalty to zero for an individual’s failure to maintain minimum essential coverage.
Elimination of the employer mandate and reduction of tracking requirements — Under the ACA, employers with 50 or more full-time equivalent employees are required to provide health insurance or pay a penalty. The ACHA eliminates the penalty for any such employers that fail to provide minimum essential coverage. Without such penalties, it is likely that regulatory changes would be enacted to eliminate the onerous employer reporting and notification requirements currently in place.
State waivers — The original ACHA was revised by the House through an amendment that gives states the flexibility to apply for waivers from certain requirements that are imposed on individual market plans and group plans offered by small employers. If granted, a waiver would allow states to opt out of mandating that insurers cover 10 essential health benefits in their health care plans. This is particularly controversial as the ACA’s prohibitions against lifetime and annual limits, and caps on out-of-pocket expenditures only apply to “essential health benefits.” Under current law, the definition of “essential health benefits” includes medical treatment such as maternity care, mental health, or substance abuse coverage. As a result, states granted a waiver would be able to define and potentially narrow such protections.
Similarly, the waiver would affect large group and self-funded employer plans that are prohibited from imposing annual and lifetime dollar limits on 10 essential health benefits. Therefore, based upon an individual state’s definition of the phrase, employers could effectively be permitted to begin imposing dollar caps on certain benefits that currently would be prohibited under the ACA.
This particular provision may prove most problematic for final passage. The budget process being used by Republicans is called a reconciliation and has very strict rules that require every piece of the bill to be directly related to the federal budget. The reason? Reconciliation requires only a simple majority for passage.
In order to avoid a Democratic-led filibuster, Republican lawmakers will have to work carefully to avoid violating the “Byrd Rule” which limits what can be included in a budget reconciliation measure. This procedural requirement helps to understand why the ACHA fails to “repeal and replace” some of the more popular provisions of ACA such as the ability for parents to provide coverage for adult children up to age 26, the guaranteed renewability of health insurance coverage, and the prohibition against discrimination based on gender for purposes of offering health insurance.