In case you somehow missed it, the GOP released their Affordable Care Act replacement last week; and the American Health Care Act (AHCA), made up of the Ways and Means (W&M) and Energy and Commerce (E&C) bills, has caused quite the stir (to say the least).
So now that we have a replacement – or, at least, the beginnings of one – the question on everyone’s mind is just what does this mean for the Affordable Care Act (ACA/Obamacare)?
Of course, the proposal has yet to become law and it stands to reason that there will be ample amounts of time spent debating its more minute details before it officially replaces the ACA. Additionally, most of the proposed changes won’t take effect until 2018 or later so, for now, you still have to file those ACA Forms.
But just what does this new act have (or not have) that the ACA doesn’t (or did)? Well, the answer is a lot (to both questions), so we’re going to focus on how business owners and insurance providers will be affected. For how you may be effected on an individual level, read more here.
Removing Penalties Connected with the Employer Responsibility Provisions
According to this new act, the penalty for the employer responsibility provisions will be eliminated retroactively beginning with the year 2016. It’s important to note that the mandate for employer responsibility provisions won’t be eliminated, possibly because of the Byrd Rule. In other words, this new legislation won’t eliminate the ACA’s employer reporting requirements.
Repealing Actuarial Value Requirements
Under the AHCA, the ACA’s actuarial value (AV) and metal level requirements after December 31, 2019, will end so states will be allowed to permit age ratios of 5:1 for plan years beginning on or after January 1, 2018. This means insurance providers will be able to sell plans with AVs of less than 60%, more than 90%, and anything in between. The maximum out-of-pocket limit in the ACA has been retained, however, so insurers cannot sell plans less generous than the ones currently allowed.
No Tax for Higher-Cost Employer Plans
Contrary to what an earlier, leaked version of the GOP’s health care plan said, the bills that make up the AHCA do not impose a tax on higher-cost employer-sponsored health plans. There’s also no repeal of the ACA’s enactment of the economic substance doctrine. This doctrine penalizes arrangements that only avoid taxes and serve no other business or economic purposes.
Changes to the ACA’s Premium Tax Credits
The biggest changes to the premium tax credits are for individuals, but small employers will see a change in their premium tax credits as well. As of December 31, 2019, the small employer tax credit would end. In the meantime, the interim credit could not be used for plans that cover non-excepted abortions (abortions performed for reasons other than the cases of rape, incest, or to save the life of the mother).
The AHCA’s New Tax Credits
There are a few new tax credits available to taxpayers at an individual level under the AHCA, so this means changes for employers and other insurance providers. The employer W-2 reporting requirements for coverage will still need to be modified and IRS tax information disclosure provisions would need to be amended to reflect the tax credit program changes.
To Sum Up
The ACHA’s tax cuts may appear attractive to health insurers and providers as they mean a trillion dollars in tax breaks. As it stands, however, the new legislation could thin out federal funding for (and therefore recipients of) Medicaid. It could also mean more expensive coverage for the elderly, lower-income families and individuals, and those with pre-existing conditions. In other words, it’s safe to say that there will be a lot more debating between the powers-that-be before the final version of the ACHA becomes law.