Background on the Proposed Changes to the American Health Care Act:
AHCA was initially introduced on March 6, 2017. Subsequently, an amended proposal was passed by the House of representatives on May 4, 2017. It includes the following summary of proposed changes to the Affordable Care Act that could directly affect employers. As proposed legislation, which must be approved by Congress and signed by the President, all details provided below are subject to change.
- Eliminates Employer and Individual Mandates: Reduces “shared responsibility payments” to “0”, effectively repealing the employer responsibility to offer affordable coverage, and the individual responsibility to obtain coverage. However, insurers could impose a 30% surcharge to individuals who allow their insurance to lapse.
- Retains Employer Reporting: Existing IRS and employee reporting requirements are not repealed and related reporting penalties remain in effect. Information provided is needed to administer premium tax credit – in place through 2019. In 2020, tax credits will shift from income-based to age-based, which may lead to simplified reporting.
- Expands Health Savings Account (HSA) Options: Increases contribution limits and allows both spouses to make catch-up contributions to same account.
- Removes Limit on Employee Contributions to Health Flexible Spending Accounts (FSA): 2017 limit is $2,600
- Eliminates Additional Medicare Tax on High Wage Earners: The additional employee withholding tax of .9 percent, which applies on Medicare wages over $200,000, will be effective only through 2022.
- Suspends “Cadillac” Tax through 2025: 40% tax on high-cost, employer-sponsored plans.
General Impact to Employers:
Although AHCA was passed by the House somewhat hastily, the Senate is expected to take a much closer look. It is likely that during committee review some provisions could be removed, revised, or completely rewritten. At this point we cannot predict what a final “bill” will include, or when it will be completed. We will continue to report additional developments throughout the legislative process.