Companies should consider preparing for health care legislative changes that Trump supports, "such as repeal of the employer mandate and allowing the sale of health insurance across state lines," said Jacqueline Breslin, director of human capital at TriNet, a San Leandro, Calif.-based HR services provider. "They should be looking ahead to determine the best course of action for updating their company’s benefits in accordance with any new legislation."
THE AMERICAN HEALTHCARE ACT
A major concern for both employers and employees alike is healthcare. The looming healthcare legislation called the American Health Care Act (AHCA), also known as “Trumpcare,” has likely added to this concern for many people. The new healthcare law is currently undergoing Senate approval following its passage in the House of Representatives on May 4, 2017. Americans should be aware of a few major features of the proposed legislation as they compare with the current Affordable Care Act (ACA) and as Trumpcare puts millions of Americans’ employer plans at risk.
“It’s anybody’s guess what will happen with health care at this point. . . However, the ACA is still the law.” - Panelist Ben Conley of Seyfarth Shaw LLP
THERE WOULD BE NO MORE INDIVIDUAL MANDATE
Under the ACA, the individual mandate requires every eligible American citizen to have health insurance, whether through a job, individual policy or government program.
Under the AHCA, the individual mandate would be entirely eliminated. However, the new law would allow insurers to impose a penalty that would effectively act as a mandate. Accordingly, if you bought a policy, lost it, or dropped it for more than two months, and then reapplied for coverage later, then your insurer could charge a penalty fee of 30 percent on top of your premiums. The fee would last for the duration of your plan year.
COVERAGE REQUIREMENTS FOR ESSENTIAL HEALTH BENEFITS WOULD BE SLASHED
Under the ACA, coverage is required for “essential health benefits,” which the ACA expressly defines as Preventive care, Outpatient services, Hospital services, Maternity care before, during and after labor, Pediatric services, Lab testing, Rehabilitative care and equipment, Mental health services, Prescription drugs, and Emergency services.
However, under the AHCA, states would have the option to waive coverage requirements for these services.Therefore, subscribers in states that waive these coverage requirements would likely pay out of pocket for the costs associated with these services.
REPLACEMENT OF THE PREMIUM TAX CREDIT
The ACA's need-based premium tax credit ensures lower-income taxpayers are eligible for a bigger credit. The credit is only available for taxpayers with an annual income of 400% of the federal poverty line or less (for single taxpayers, 400% of the federal poverty line is around $50,000).
Trumpcare would replace the credit with a new premium tax credit based largely on age: the new credit is a flat amount of $2,000 for taxpayers aged 30 and under, graduated up to a maximum of $4,000 for taxpayers age 60 and over. Despite these major changes, the AHCA still faces a contentious legislative process.
WHAT THIS MEANS FOR THE WORKPLACE AND THE IMPACT ON EMPLOYERS
Large and mid-size companies, who offer their full-time employees adequate, affordable health benefits, are always looking to lower the cost of providing health care.Under the ACA, employers could choose the most lenient state-level standards to make their overhead costs cheaper. In practice, this means that employers could start offering plans to their employees that don’t include Obamacare existing protections for lifetime limits. For example, if maternity care is no longer defined as an essential health benefit, then employees may hit a lifetime limit and be forced to pay huge out-of-pocket costs for a catastrophic health issue like a high-risk pregnancy.
“In 2015 nearly half of people with health insurance in the United States had coverage through their jobs.”
Employers should communicate with employees as they hear news of upcoming ACA changes including informing employees how their health benefits will or will not be affected if the employer mandate is repealed. There are other significant changes, including new notions in the AHCA which will affect employers
EMPLOYER SHARED RESPONSIBILITY (“ESR”) RULE
Under the ESR Rule, the penalty is dropped to $0, from the original $2,000 / $3,000 penalty amounts. This is very helpful for employers. Many employers set up intricate systems to track and measure which employees were "full-time," so that those full-time employees could be offered coverage. However, under the AHCA, the concept of "full-time" under the ESR Rule is eliminated. Moreover, the penalties are retroactively taken away for 2016 and beyond.
An employer would still need to inform the federal government whether an employee received an offer of coverage. This would be simplified reporting, accomplished through the Form W-2, rather than the existing Forms 1094 / 1095. This change starts in 2020. Thus, it is possible that 1094 / 1095 reporting will still be required until then. But it is also possible that the Internal Revenue Service will cut back on the information which must be reported.
COORDINATE WITH THE NEW TAX CREDITS
The AHCA provides new tax credits in lieu of the ACA's premium tax credits. The new tax credits are not available to anyone who receives an offer of employment-based coverage. This means that employers would need to inform employees annually and mid-year of this offer, upon the request of the employee. As such, there will be a new reporting requirement with respect to these tax credits. But the reporting should be more tolerable than the 1094 / 1095 reporting.
OVER THE COUNTER ("OTC") REIMBURSEMENTS RETURN
AHCA would repeal the ACA's prohibition on health flexible spending accounts ("FSAs"), health reimbursement arrangements ("HRAs") and health savings accounts ("HSAs") reimbursing the cost of OTC medications. The change would be effective in 2018. FSAs also would see their $2,500 removed.
The maximum HSA contribution would increase to a variable amount calculated by the sum of the plan's annual out-of-pocket maximum plus the amount of the deductible. The basic limit would be $6,550 for self-only coverage and $13,100 for family coverage, but the limits could be higher. The change would be effective in 2018.
CADILLAC TAX DELAYED
The so-called "Cadillac tax" on high-cost health plans would be delayed until 2025. Also of critical importance is that the AHCA does not cap the tax-free nature of employer-provided health insurance. A prior, leaked drafted had contained a cap on the value of how much could be excluded.
TAX CREDITS FOR COBRA
The AHCA's tax credits are available not only for individual policies, but also for "unsubsidized" COBRA. It remains to be seen how this will impact employers. For example, must employers begin accepting funds directly from the U.S. Treasury to pay for a former (or current) employee's COBRA premiums? It appears that employers must, at a minimum, "certify" that the COBRA coverage is "unsubsidized" (e.g., there are no employer contributions towards its cost).