On February 24, Republican leaders in the U.S. House of Representatives released a 105-page “discussion draft” of legislation designed to dismantle the Affordable Care Act (ACA). This signals a critical first step in Congressional Republicans’ effort to use legislative process known as “reconciliation” to repeal and replace the ACA. This Benefits Bulletin provides a high-level overview of the key provisions in the discussion draft.
Notably, the bill would cap the employee tax deduction for employer-sponsored coverage. It directs the Secretary of the Treasury to utilize a formula that would set the cap at a dollar amount equal to the 90th percentile of plan cost. The dollar amount would be set in 2019 and adjusted for inflation thereafter.The proposal eliminates the individual and employer mandates by making the penalties equal to zero dollars. Surprisingly, the bill proposes that penalties be eliminated retroactively to January 1, 2016.
The draft legislation imposes an immediate repeal several of the ACA taxes and fees, including the following:
- Annual provider fee;
- Medicare tax on high income individuals;
- Net investment income tax;
- Prescription drug tax; and
- Medical device tax.
Annual fees to fund the Patient Centered Outcomes Research Institute (PCORI) and the “Cadillac” tax would be repealed effective in 2020.
Individual subsidies would be replaced with an annual age-based tax credit as follows:
- Individuals under age 30: $2,000
- Individuals age 30-39: $2,500
- Individuals 40-49: $3,000
- Individuals age 50-59: $3,500; and
- Individual age 60+: $4,000
The tax credit would be capped at $14,000 per family per year. It would only be available to taxpayers who purchase a plan on the individual market and who are ineligible for group health coverage (e.g., through an employer-sponsored plan), Medicare, Medicaid or another government-sponsored program.
Health Savings Account (HSA) contribution limits would be increased to the applicable out-of-pocket cost for high deductible health coverage. Spouses would also each be allowed to make “catch-up” contributions to the same HSA.
The bill would allow each state to determine its own required health benefits package, eliminating the ability of Health and Human Services to define the scope of “essential health benefits.”
Additionally, the proposal allows ACA subsidies for individuals to continue through 2018, but modifies some qualification requirements, extends subsidies for individual plans purchased outside of the Marketplace, and disallows subsidies for plans covering abortions.
Other provisions in the discussion draft include:
- Reforming Medicaid, including a repeal of the ACA expansion and new caps on benefits;
- Discouraging gaps in coverage by allowing insurers to impose limited penalties in certain circumstances; and
- Increasing the permissible age bands in the individual and small group market from a 3:1 ratio to a 5:1 ratio
We will be closely monitoring the status of this bill and will inform you if and when developments occur. If you have any questions please contact us today.
The materials and information contained in this email represent the opinions of Alltrust Insurance, Inc. and are for informational purposes only, not for the purpose of providing legal advice. The opinions expressed in this communication are made based on currently available information and are subject to change at any time. For advice about a specific legal question or situation in your organization, Alltrust Insurance, Inc. recommends you contact legal counsel of your choice.
