The Love/Hate Relationship with the Affordable Care Act (a/k/a “Obamacare”)
Apparently rhetoric matters. Although the former President eventually embraced the term himself, “Obamacare” was originally a derogatory term used for health care reform by Obama’s opponents in Congress. Anecdotal evidence suggests that many individuals didn’t know that the Affordable Care Act and “Obamacare” were the one and the same. Now that “Obamacare” may be repealed and replaced, many who demonized it realize that the law is more than just health insurance marketplaces.
Under the ACA mandated benefit provisions, group health plans provide first-dollar preventive care benefits, no longer contain annual or lifetime benefit limits, prohibit the imposition of pre-existing condition exclusions, and allow adult children to stay on their parents’ health care plans until age 26. The ACA also expanded Medicaid – at least in states that elected to use federal funds to do so.
Despite past inaccurate reporting, nothing in the ACA required any employer to provide health care coverage to their employees, and most small employers were never subject to the ACA. Under the employer mandate, certain “large employers” risked the imposition of penalties if they did not offer coverage to all employees working, on average, at least 30 hours a week. ACA compliance efforts have been costly – in both time and money. For example, employers adopted methods and overhauled payroll procedures in order to count hours of service and established new processes and procedures required to satisfy new IRS and employee reporting requirements.
On March 6, 2017, proposals, collectively called the American Health Care Act or AHCA, were unveiled by two House Committees intended to repeal and replace the ACA. Of course it is too early to tell what, if anything, will ultimately be enacted, and its introduction has already drawn opposition from both sides of the aisle. This proposed legislation is scheduled to be “marked up” in these Committees on March 8, 2017, and, possibly, voted on even before the Congressional Budget Office “scores” it. This CBO report will provide estimates of how many individuals stand to lose health care coverage under the AHCA and how much it will cost taxpayers.
The introduction of the AHCA reflects a response to a Congressional Budget Resolution passed earlier this year directing the repeal the ACA through budget reconciliation. Legislation passed through the budget reconciliation process does not require 60 votes in the Senate, and, under something called the “Byrd Rule,” only those provisions that relate to taxes and revenue can be passed through budget reconciliation. This means that the popular benefit mandates described above, cannot be repealed through budget reconciliation. We anticipate, however, that additional changes to the ACA will be made through the regulatory process and subsequent legislation. In other words, the AHCA only represents phase I of the ACA repeal and replace process.
Certain portions of the proposal focus on insurance market stabilization. For example, under the AHCA, carriers selling insurance in the individual and small group market, will be permitted to increase premiums for the first plan year, if an individual had more than a 63-day break in continuous health care coverage during the 12 month period prior to enrollment. Other provisions will restrict the ability to enroll in coverage outside of the carrier’s open enrollment period. The AHCA’s amendments to Medicaid put more pressure on states to both fund and administer those programs Even without the CBO scoring, it is anticipated that up to 10 million individuals will lose health coverage currently available under the ACA’s Medicaid expansion provisions. If AHCA is enacted in its current form, Medicaid will no longer be required to provide specific categories of benefits – called “essential health benefits.”
The ACHA repeals the employer mandate, the individual mandate, and numerous other potential revenue generators. In addition to repealing premium tax credits and cost-sharing reductions for the purchase of exchange coverage, other ACA revenue provisions intended to offset the costs of providing subsidized coverage are eliminated. These include the ACA-imposed annual contribution limit on medical flexible spending accounts (FSAs), the additional Medicare tax on high earners, and the 10% tanning tax, the medical device excise tax,. The ACHA will once again permit over-the-counter drugs to paid from tax-advantaged accounts, such as FSAs, Health Reimbursement Accounts and Health Savings Accounts. The so-called “Cadillac Tax” (tax on high value health care coverage) is both repealed and then it is scheduled to be reinstated in 2025.
While touted as “repeal” and “replace,” portions of the AHCA look more like just a modified version of the ACA. The proposal provides a new refundable tax credit to facilitate the purchase of health care coverage – both within and outside the marketplace. These AHCA tax credits will be available only to individuals without access to employer-provided or government-based health insurance coverage. The tax credits will be increased based on age and not on income and will not be available to individuals with income over certain specified amounts. Available tax credits that are not required to purchase high-deductible health insurance can be deposited in a Health Savings Account (HSA) and limits on HSA contributions will be based on maximum out-of-pocket limitations. The AHCA has been referred to by some in Congress as “Obamacare Lite,” perhaps due to the introduction of these new tax credits.
Remember, we all impacted by changes to the availability, affordability and quality of health care coverage. Changes to the ACA will impact all of us as taxpayers, individual consumers of health care services and purchasers of health insurance for ourselves and our families. Other interested constituents include employers that offer health care coverage to employees, hospitals, physicians and other health care providers, state lawmakers and agencies responsible for administering Medicaid, and insurers selling coverage both inside and outside the marketplace.
Clearly, the foregoing is not intended to provide a comprehensive overview of this first attempt to “repeal” and “replace” the ACA. We know that health care is complicated – so pay attention!