ILMA Compoundings July 2017 - 32

COUNSEL COMPOUND
Employer Health Insurance Plans Affected
by Obamacare Replacement Legislation
By Jeff Leiter

he Senate is struggling to
reach consensus on a bill to
repeal and replace Obamacare,
while the House-passed measure, the
American Health Care Act of 2017
(AHCA), would partially repeal and
replace parts of the seven-year-old Affordable Care Act (ACA). The AHCA
makes changes concerning patient
access, Medicaid reforms and individual insurance markets. There are also
provisions in the AHCA that affect
employers. Let's review some of them.
The AHCA does not repeal the ACA
mandate that employers with at least
50 full-time equivalent employees offer
health insurance to full-time employees
or pay a penalty. Instead, the bill reduces
the penalty for failing to offer health
insurance to zero dollars. If the provision
becomes law, employers who paid the
penalty for 2016 could seek relief.
Interestingly, while this penalty is
eliminated, the measure does not alter
employers' reporting obligations under
the ACA, including information about
the offer of coverage on IRS Form W-2.
It is possible that because the AHCA
includes a new advance refundable tax
credit to certain individuals to purchase
health insurance, the reporting regime
could affect employers of all sizes.
The ACA requires individual and
small-group health plans to cover 10
categories of "essential health benefits,"
including emergency care, maternity
and newborn care and prescription
drugs. At the same time, it prohibits
plans from imposing annual or lifetime
dollar limits, and it limits enrollees'
"out-of-pockets" for the essential health
benefits. The AHCA, as passed by the
House, would allow states to create

JULY 2017

| COMPOUNDINGS | ILMA.ORG

their own definitions of "essential
health benefits" beginning in 2020.
Because certain employer health plans
can use a state's essential health benefits
as a benchmark to determine whether it
has met the obligations on annual and
lifetime limits and out-of-pocket expenses, any variability among the states
could provide additional flexibility to
employers on what insurance is offered
to employees and their dependents.
The ACA imposed a nondeductible,
high-cost plan excise tax, known as
the "Cadillac Tax," on certain employer-provided plans. Congress previously
delayed the tax and made it fully
deductible. Under the AHCA, the implementation date has been further delayed to any taxable period before Jan.
1, 2026. Because of its unpopularity,
I expect that the ACA's "Cadillac Tax"
will never become operative.
The AHCA makes changes to health
savings accounts (HSAs), including the
rules applicable to employer-offered
HSAs. The legislation would raise the
limits on annual HSA contributions
and would allow married individuals
who are 55 or older to make catch-up
contributions to the same HSA.
The bill also would remove the cap
on employee salary reduction contributions to health flexible spending
accounts. Under current law, voluntary
employee salary reductions for contributions to a health flexible spending
account are limited to a maximum
of $2,600 for 2017. The AHCA,
beginning in 2023, would repeal the
additional Medicare tax of 0.9 percent applied to and withheld from an
employee's wages (or a self-employed
person's self-employment income)

above $200,000 for an individual or
$250,000 for a married couple. The
ACA eliminated the ability of employers to take a tax deduction based on
the value of the federal subsidy they
received for its Medicare-eligible former
employees to receive greater prescription drug benefits. The AHCA would
restore this deduction for employers for
retiree prescription drug costs.
Lastly, the AHCA would roll back,
beginning in 2020, the tax credit for
certain employers with fewer than 25
full-time equivalent employees that
provide qualified health insurance
coverage through the ACA's small
business health options program
(SHOP) marketplace. While the full
rollback of the tax credits does not
apply until 2020, the legislation would
not provide the tax credits before 2020
to those employers who provide health
insurance coverage for abortions
except where necessary to save the
life of the mother or for pregnancies
resulting from rape or incest.
Let me emphasize that the changes
discussed above have not become law.
The fate of the AHCA in the Senate
is uncertain. However, while much
of the discussion about repealing and
replacing Obamacare in the media has
focused on the individual markets,
the legislation does have consequences
and opportunities for employers who
offer health insurance coverage to their
employees. ILMA will continue to
monitor and report.
Leiter serves as general
counsel to ILMA, representing
the Association since 1981. He
may be reached at 202-4666502 or jleiter@bmalaw.net.

http://www.ILMA.ORG

ILMA Compoundings July 2017

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