Action Taken: Late yesterday, the House Energy & Commerce and Ways & Means Committees released the GOP plan – the American Health Care Act - to repeal and replace the Affordable Care Act (ACA). Both committees plan to mark-up (finalize) the provisions of the plan that are within each committee’s jurisdiction. Both mark-ups begin Wednesday, March 8, and are expected to take considerable time to complete. However, both committees vow to finish their work before the end of the week. After that, the plan will go to the House for a vote and then to the Senate. Controversy is expected at each step of the process.
As released on March 6, and subject to amendment during mark-up, House floor debate, and in the Senate, the plan would do the following:
Individual and employer mandates: The plan would reduce to zero the penalties for failure to comply with the ACA’s mandates. In the case of employers, this means that the law will continue to require that most employers offer affordable, qualified (i.e., containing statutorily-required minimum essential benefits) health insurance to all full-time (defined as 30-hours/week of work) workers or pay an assessment. But assessments are reduced to zero. Thus, this is a functional if not actual repeal of the employer mandate. The plan also gives authority to Treasury to modify the mandate’s reporting requirements to reflect the zero penalty, yet still collect necessary information to verify if an employee was offered an employer-sponsored plan to determine whether an individual can qualify for the new tax credits.
In the case of individuals, the law would still require them to carry qualified health insurance, but the assessment for failure to do so is reduced to zero. So, there would be no penalty (assessment) if a person chooses not to buy health insurance.
Insurance reforms: Some of the ACA’s insurance reforms are not repealed. The House GOP plan would preserve the following ACA provisions:
However, the House GOP plan repeals or significantly modifies other ACA provisions:
Taxes: The plan repeals all but one of the ACA’s taxes. And notably, in its current form it does not include a tax cap on employer-provided health insurance. Earlier versions of the plan had included a proposal to tax employees on the amount their employers paid for their health insurance to the extent that the premiums exceed 90 percent of the national average.
The one ACA tax that stays on the books is the Cadillac tax—the tax that requires insurers (or self-insured plans) to pay a 40 percent tax on the amount by which premiums on their employer-provided health insurance exceeds statutory maximums (generally, that would be a 40 percent tax on individual premiums over $10,200/year and $27,500 for family coverage). Currently, the Cadillac tax is set to take effect in 2020; this plan defers the effective date of the Cadillac tax to 2025.
Among the taxes that are repealed are:
The plan also restores the pre-ACA rules regarding the deduction for expenses allocable to Medicare Part D (prescription drug coverage) subsidies, and repeals the medical device tax and the tanning tax. It also repeals the limit on the deductibility of compensation paid to health insurance company executives.
HSA Expansion: The plan increases HSA contribution limits to an amount equal to the maximum of the sum of the annual deductible and out-of-pocket expense limits permitted by a high deductible health plan (HDHP). So, for 2018, that would mean an annual HSA contribution limit of $6,550 for an individual or $13,100 for a family. Plus, the plan would allow both spouses to make catch-up contributions to one HSA, also as of 2018. Further, the plan will treat HSAs that are established during a 60-day period from the start of coverage under an HDHP as having been established as of the date coverage starts under the HDHP. (This means qualified medical expenses incurred during the first 60 days of HDHP coverage can be paid from an HSA that is established within 60 days of the start of the HDHP coverage.)
Subsidies: This plan repeals the ACA’s premium tax credit subsidy structure. Instead, it proposes tax credits for individuals who do not have an offer of health insurance from their employers, or access to a government health insurance program. The tax credits are age-weighted, and income limited. They are advanceable and refundable (i.e., they are available prior to year-end and to taxpayers whose tax liability is less than the amount of the tax credit). The tax credits are $2,000 for those under age 30; $2,500 for those between 30 and 39; $3,000 for those between 40 and 49; $3,500 for those between 50 and 59; and $4,000 for those over age 60. The tax credits are per person and capped (for a family) at an aggregate of $14,000. They are indexed for inflation. They begin to phase out at AGI of $75,000 (individual) or $150,000 (family). The phase out rate is $100 for every $1,000 in income above the initial phase-out level.
Medicaid expansion: The American Health Care Act repeals the Medicaid expansion program in the ACA as of January 1, 2020 and replaces it with federal funds (“state innovation grants”) that allow states flexibility on how to provide health care for their under-poverty population.
Market stabilization: The plan also includes a number of market stabilization provisions, principally by way of authority to the states to adjust rules to make sure the individual market doesn’t crash as a result of these changes.
Next Steps: The House Energy & Commerce and Ways & Means Committees will markup the bill on Wednesday and allow Members to consider the policies, offer amendments, and vote on a final product. The final Energy & Commerce and Ways & Means products will be sent to the Budget Committee to put together and send to the floor for a House vote.
Stay tuned as events progress...