The health care bill released by the Senate this week closely hews to the bill that was narrowly approved by the House, at least with regard to employer-sponsored group health plans.
On June 22, the Senate made public the Better Care Reconciliation Act (BCRA), its measure to repeal and replace key sections of the Affordable Care Act (ACA). The House passed its version of a replacement bill, the American Health Care Act (AHCA), on May 4. If the Senate approves its bill, which is not expected to receive any Democratic support, the Senate and House versions would need to be reconciled by a joint committee.
"The Senate proposal largely mirrors the House measure with some significant differences," said Ben Conley, a partner with law firm Seyfarth Shaw in Chicago and a faculty member of the nonprofit Health Care Reform Center and Policy Center. For instance, both bills would:
- Eliminate employer mandate penalties and ease employee tracking/reporting requirements. Under the ACA, employers with 50 or more full-time employees or full-time equivalent employees are required to provide ACA-compliant health insurance or pay a penalty. Both the House and Senate bills would reduce the penalty to zero for failure to provide minimum essential coverage. Without these penalties, follow-up regulatory changes could reduce reporting and notification requirements, benefit attorneys said.
- Eliminate individual mandate penalties. Under current law, most individuals are required to purchase health insurance or pay a penalty. The bill reduces the penalty to zero for failure to maintain minimum essential coverage.
- Keep but delay the "Cadillac tax," and eliminate other levies. The ACA imposed a 40-percent excise tax on the value of employer-sponsored health plans exceeding $10,200 for individual coverage and $27,500 for family coverage, indexed for inflation. Both the House and Senate bills would delay the excise tax, now set to take effect in 2020, until 2026 and end all other ACA taxes on employers.
- Raise health savings account (HSA) contributions. The Senate bill, like its House counterpart, would nearly double annual HSA contribution limits above the current limits (for 2017: $3,400 for self-only coverage and $6,750 for family coverage), making the cap equal to the out-of-pocket maximums that apply to high-deductible health plans (for 2018: $6,650 for self-only coverage and $13,300 for family coverage).
It would also allow both spouses to make catch-up contributions to the same HSA and create a grace period for using HSA funds to pay qualified medical expenses incurred between HSA eligibility and enrollment.
- Repeal tax increases on HSAs. The ACA imposed a 20-percent tax on distributions that are not used for qualified medical expenses. The House and Senate bills lower the tax rate to 10 percent and allow individuals to use HSA funds for over-the-counter medical items.
- Repeal the limit on contributions to health flexible spending accounts (FSAs). The ACA limited the amount an employee may contribute to a health FSA to $2,500 indexed for inflation, with the 2017 limit set at $2,600. This BCRA, like the AHCA, would repeal these annual limits and allow FSAs to reimburse over-the-counter medications.
Subsidies Differ from House Bill
In the House version of the bill, health care subsidies were tied to age, so the older a person is, the more assistance he or she would receive in paying for health insurance. In the Senate version of the bill, subsidies would be tied to income, as they are in the ACA.
While largely maintaining the ACA's premium subsidies structure, the Senate bill would tighten the eligibility criteria starting in 2020. "Maintaining the income-based subsidy structure may keep costs lower than under the House plan but it limits subsidies to those making 350 percent of the federal poverty level, as opposed to the ACA's 400 percent," said Shan Fowler, senior director of product strategy at Benefitfocus, a Charleston, S.C.-based provider of cloud-based benefits software.
Essential Health Benefits
Like the House bill, "The Senate bill allows states to repeal essential health benefits mandated by the ACA, including things like maternal care and mental health care," Fowler said. He noted that a poll released last fall by the International Foundation of Employee Benefit Plans showed that nearly 3 in 4 employee-benefits professionals support essential health benefits, and more than 4 in 5 support mental health benefits in particular, indicating that a large majority of employers would keep these coverage provisions in their health plans even if not mandated to do so.
Under the ACA, employers-sponsored health plans must meet the ACA's parameters for minimum essential coverage, minimum value and affordability. Employees who are not offered a plan that meets these criteria and who satisfy income-eligibility requirements are eligible for subsidized coverage through the ACA's public exchange/marketplace—and if their employer has 50 or more full-time or equivalent employers, then the employer faces penalties under the ACA's shared-responsibility provisions.
Under the BCRA, however, after 2019 tax credits would not be available to individuals if they are offered minimum essential coverage, without regard to any affordability or minimum value requirement, according to analysis by Lockton Benefit Group of Kansas City, Mo.
ACA Reporting Requirements
The Senate bill "doesn't appear to differ from the House bill with respect to annual ACA information-reporting by employers," Conley said. As with the House's American Health Care Act, "even in the absence of an individual or employer mandate, if there is a tax credit and that tax credit is conditioned, in part, on whether your employer has offered you qualified health insurance coverage, the IRS needs to know whether the employer offered you qualifying health insurance coverage," he explained.
However, eliminating the individual and employer mandate penalties would allow federal agencies to simplify employer reporting. For instance, "there would be a reduced burden in that you no longer have to track full-time staff for purposes of offering coverage to individuals working 30 or more hours a week; that piece would drop off." He further noted, "there likely will be no [Form 1095] Line 16 reporting for the employer mandate safe harbor, given that the employer mandate penalty would be zeroed out."
After 2019, when the new provisions would take effect, "presumably, the IRS could move to modify employers' reporting requirements, and they could even do so before 2019," Conley said.
[SHRM members-only HR Q&A: How has the Affordable Care Act affected employers that use part-time employees?]
Cadillac Tax Persists
The Senate bill "fully repeals every other tax imposed by the Affordable Care Act, and the same must be done for the Cadillac tax to avoid harming the 1 out of 2 Americans who receive health coverage through their employer," said a statement by the Alliance to Fight the 40, which advocates repeal of the tax.
Boost for HSAs
"The language and updates to the Senate bill regarding health savings accounts have carried over, unchanged, from the House bill," Fowler said. "It would change the annual HSA contributions to line up with maximum out-of-pocket amounts. This change is positive for the growing number of employees and individuals with high-deductible health plans and HSAs," as it will help them save more today to prepare to manage future health care expenses.
"The increased contribution limits, grace period for expenses incurred between HSA eligibility and enrollment, joint catch-up contributions, decreased excise tax on unqualified distributions, and ability to purchase over-the-counter medications with an HSA are all improvements on current law and make HSAs an even more attractive option to save for current and future medical expenses," noted Harrison Stone, general counsel at ConnectYourCare, a Baltimore-based HSA services provider.
ACA Market Reforms Kept
"Popular ACA market reforms would remain in place," said Robert Projansky, a partner with law firm Proskauer in New York City. "These include, among other things, mandated dependent coverage to age 26, first-dollar coverage of preventive care, prohibition on annual and lifetime dollar limits, and prohibition on pre-existing condition exclusions."
While both the House' and Senate bills repeal the ACA's individual mandate penalties, "the AHCA included a premium surcharge to be applied on insurance purchased on the individual market following a break in coverage of more than 63 days," Projansky noted. "This, at least, provided some financial incentive for individuals to maintain insurance coverage." [Update: on June 26, Senate Republican leaders released a revised version of the bill in which consumers who had a break in coverage for 63 days or more would be subject to a six-month waiting period before their coverage begins.]
The Senate bill will shortly be "scored" by the Congressional Budget Office (CBO), which will estimate how many additional Americans would go without health insurance under the plan and how passage would affect federal spending. After the CBO score, the Senate will vote on the bill. If the bill passes, it would go to joint committee where the House and Senate versions would be reconciled. That final bill, depending on the scope of its changes, may again need to be approved by the House and Senate.
"With 52 seats in the majority party, Senate leadership can only afford to lose two Republicans, with Vice President Mike Pence breaking the tie," said Chatrane Birbal, senior advisor for government relations at the Society for Human Resource Management.
SHRM "has not yet taken a formal position on the Senate's proposal as we are still reviewing the full legislative text," Birbal said. Similarly, SHRM did not formally take a position on the House-passed bill, "as we remain concerned about its potential implications on employer-sponsored coverage, and the health care coverage these plans provide to over 177 million Americans. SHRM does support the reduction of the employer mandate penalty and looks forward to working with Congress to repeal the mandated employer coverage and reporting requirements, which are an administrative and financial burden to employers."
She added, "SHRM applauds the inclusion of a six-year delay of the ACA excise tax on health care plans but will continue to advocate to fully repeal the tax. Furthermore, SHRM fully supports the repeal of the restrictions on the use and limitations on contributions to health savings accounts and flexible spending accounts."
This article originally appeared in SHRM.org. To view the original article, please click here.