Since the inauguration of a new president in January, healthcare legislation to replace the Affordable Care Act (ACA) has been a hot topic of conversation, not only among employers and healthcare providers, but many American citizens as well. Multiple rumors have been making their way down from Capitol Hill, but it appears as though we finally have some concrete ideas from House Republicans — even if they aren’t fully fleshed out in terms of finances.
Regardless of what healthcare legislation is passed, it is largely expected that the employer mandate will be repealed, which will have some sort of effect on many American employers. Let’s take a look at the proposed healthcare legislation and other documents from the Department of Health and Human Services (HHS) to determine what employers might be able to expect from lawmakers in the coming months.
The New GOP Healthcare Bill
On Monday, March 6, 2017, House Republicans released what is being collectively referred to as the American Health Care Act (AHCA), which is intended to partially repeal, but also replace the ACA. As anyone might expect in a heated political climate, the proposed healthcare legislation has been met with mixed reviews.
The proposed bill would keep some of the popular components of the ACA, such as the provisions that prohibit insurance companies from denying coverage based on pre-existing conditions or capping the amount of benefits received in one year (or a lifetime). In addition, people would be allowed to remain on their parents’ health insurance plans up to age 26.
While pre-existing conditions would no longer be a reason insurance companies could deny coverage, they would be allowed to charge up to 30 percent more for enrollees who let their coverage lapse. Coverage lapses are common among those suffering from chronic illnesses or serious medical conditions because they are likely to miss work for an extended period of time. Since the Family Medical Leave Act (FMLA) only protects workers for 12 weeks, those receiving extensive treatments (such as chemotherapy) are some of the most commonly affected by lapses.
Other, less popular and more controversial areas of the ACA would be removed. The individual and employer mandates would both technically still exist, although the penalties for non-compliance would be reduced to nothing, effectively killing them. In addition, “taxes on health insurers, pharmaceutical and medical device manufacturers” would be completely repealed and the Cadillac Tax would be postponed until 2025.
The new proposed healthcare legislation would continue expanded Medicaid funding adopted by some states — but only until 2020, at which point, federal matching would be restricted to a set amount on a per person basis. The states would be expected to make up the difference in funds. Critics argue that most states will struggle to do so, leading to Medicaid enrollees receiving less financial support — and since this demographic is already working with lower incomes, they are less likely to seek medical attention until absolutely necessary.
In addition, the AHCA would not allow Medicaid funds to be used at Planned Parenthood — essentially “defunding” the organization in a different way. Some say this is most likely to affect low-income individuals (especially women) who use Planned Parenthood for cancer screenings, access to birth control, and mammograms. Medicaid funds are already banned by federal law from being used for abortion services.
The proposed healthcare legislation would also increase health savings account (HSA) limits starting in 2018. The current limits are $3,400 for individual coverage and $6,750 for families. The AHCA would increase those numbers to about $6,550 for individuals and $13,100 for families.
This version of healthcare legislation would also make changes to ACA subsidies, in that the AHCA would provide tax credits instead — that would not reach as far as the current system. According to a study conducted by the Kaiser Family Foundation (KFF), eligible 60-year-olds would receive about $4,000 in tax credits under the AHCA, whereas the same 60-year-old would have received about $9,900 in ACA subsidies.
The ACA subsidy system was also based on earned income and local cost of insurance premiums, as some areas were more expensive than others (Alaska, for example). Generally speaking, the less you made in a year, the higher your subsidy would be. With the AHCA, tax credits are based largely on age, with amounts increasing in tandem, but with credits being phased out as income increases to $75,000 for individuals ($150,000 for families).
One of the caveats with this healthcare legislation is that health plans covering abortion services would not be eligible for tax credits. Individuals shopping for coverage with the intent to use tax credits would need to be careful when selecting a plan to make sure their policy is compliant.
Healthcare legislation under the AHCA would also increase the cap the ACA set for enrollees aged 50 and above. The ACA only let insurance companies charge three times what they would charge a younger person, but the AHCA proposal lifts that cap to five times. Milliman conducted a study to determine the effect this change would have on people ages 50 and older for the AARP Public Policy Institute. They found that the average 60 to 64 year old would experience a 22 percent increase in premiums per year (about $3,200, bringing their yearly premiums to $17,900), while 50 to 59 year olds would see a slightly smaller increase of 13 percent (about $1,500, bringing their yearly premiums to $12,800).
As far as how much this bill will cost taxpayers, as well as what the average plan would cost someone purchasing insurance on the individual market, the Congressional Budget Office (CBO) just yesterday released its assessment. According to the CBO analysis, by 2018, 14 million more people would be uninsured under the legislation than under current law, while the legislation would reduce federal deficits by $337 billion over the next decade, with the largest savings coming from reductions in Medicaid outlays and the reduction of Affordable Care Act (ACA) subsidies.
HHS Secretary Tom Price said the White House disagrees “strenuously” with the report and called the finding that 14 million people would end up without insurance “virtually impossible.”
The CBO also predicts that average premiums will go up in 2018 and 2019 because “fewer comparatively healthy people” are expected to sign up, since the individual mandate will have been eliminated. However, by 2020, that increase in average premiums is expected to be offset, so that by 2026 the average premiums for single policyholders in the non-group market would be 10 percent lower than they are under Obamacare, the CBO says.
What a Change in Healthcare Legislation Could Mean for Employers
As previously stated, if the proposed healthcare legislation goes through, the employer mandate would essentially be repealed. This may come as a relief for employers right on the bubble of 50 full-time equivalent (FTE) employees who are either suffering with less employees because they cannot afford to offer health insurance or are struggling to cover the cost of premiums.
When the ACA was first announced, there were fears that some employers would abandon employer-sponsored health insurance, opting to pay the penalty and letting their employees purchase their own insurance on the Marketplace. In large part, this fear did not come to fruition, especially among large employers, as they recognized the power of employer-sponsored healthcare in retention and recruiting efforts.
An analysis from the KFF found that employer-sponsored healthcare is holding strong, in spite of concerns over how the ACA would affect such programs. In fact, after a steady decline of enrollees in employer-provided healthcare from 1999-2009, numbers have leveled off and remained steady (within one percentage point) since then.
Even if you already offer employer-sponsored insurance and plan to keep doing so, the passing of this healthcare legislation may still affect you. For example, the ACA requires that employers offer affordable coverage to 95 percent of FTEs and their dependents up to age 26. Depending on the changes made in the AHCA, employers would not be required to offer healthcare, but if they do, they’d still be required to offer insurance to dependents up to age 26. In addition, any changes made to what “affordable coverage” means could affect the options you provide to your employees, as well as the portion you are required to cover.
If you are a classified as a small business and have fewer than 50 FTEs (and therefore, are not required to offer health insurance), it is unlikely that this healthcare legislation will have much of an effect of your business directly. It’s certainly possible that your employees will be affected though, so remaining knowledgeable regarding changes is important, as they may come to you with questions.
It’s also important to remember that uncertainty in people’s lives can have unintended effects on their job performance. Employees of small businesses are likely candidates to shop on the ACA Marketplace, which means that no matter what healthcare legislation is passed, their healthcare may be affected — because something will get passed, even if it isn’t this specific bill. Even the most dedicated employees can become discouraged or distracted by financial concerns or the possibility of losing their health insurance. The best thing you can do is continue to create an environment in which they can feel safe and cared for.
As for how the employer mandate would be lifted, that is still to be determined. If this healthcare legislation passes, it’s possible that any real changes couldn’t be made before contracts are up, even though the mandate lift would go into effect retroactively. So for non-profit businesses, that might be July 1 and for for-profits, that might mean January 1, 2018. You’ll have to consult with your employee benefits broker regarding the details of your insurance contract to make sure you don’t incur any penalties for early termination.
How the HHS Market Stabilization Rule Affects Employers
On February 17, 2017, HHS released a new rule in anticipation of a Republican replacement plan for the ACA. Their proposed rule is intended to provide market stabilization during a possible transition from the ACA regulations already on the books.
The first major change would be a shortened period of open enrollment on the individual market. Under ACA regulations, open enrollment would have been from November 1, 2017 through January 31, 2018, but this proposal shortens the time frame by about 45 days. The new open enrollment period would be more aligned with employer-sponsored health insurance time tables and would go from November 1, 2017 to December 15, 2017.
HHS will also be tightening restrictions on special enrollment periods (SEP) through healthcare.gov. In the past, enrollees would be allowed to provide proof of their eligibility for a SEP after they were already enrolled, or in some cases, not at all. This new rule would require every SEP enrollee to provide supporting documentation. As there is no indication of changes made to employer-sponsored healthcare, it is safe to assume the 30-day SEP will remain intact.
The HHS rule would also allow for more flexibility on the parts of states and insurance companies. All insurance policies offered through the ACA are required to meet a certain actuarial value corresponding to the metal tier in which they are offered. This rule gives a greater margin of error to insurance companies, as well as offering more control to the states in terms of what “quality healthcare” means for their residents — the assumption being that states will know better than the federal government what “quality” healthcare providers are available in their area.
New Information on Healthcare Legislation
The AHCA will undoubtedly go through many revisions (just as the ACA did in 2009 and 2010), but until a bill passes through the House, the Senate, and is signed by the President, it’s important to remember that regulations set by the ACA are still in effect. Be sure to continue following requirements as they stand currently while keeping up to date on possible changes.
Employees will expect some kind of communication from you regarding possible changes to your healthcare plan, so having a plan in place (even if it’s fluid) is probably a good idea. As additional information becomes available, you and your leadership team can adjust as necessary.
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What questions do you have about how this healthcare legislation could affect your business? Leave us a comment below or contact us. We’re happy to provide answers!