On Thursday, May 6, the U.S. House of Representatives passed the American Health Care Act (AHCA), by a vote of 217 to 213. The bill will now be sent to the Senate, where it faces revisions and amendments, and then another vote. The Republicans hold 52 of the 100 seats in the Senate, and thus can only stand to lose two votes to keep the legislation alive. If there is a tie, VP Mike Pence will be the tie breaker. Thus, as it stands right now, the future of the AHCA is pretty shaky. Still, it is important for employers to be aware of the potential implications, and to be prepared for changes that may come about as a result. Here are a few things that employers should know about the AHCA:
- It would get rid of the employer mandate. The employer mandate of the current ACA requires employers with 50 or more employees to provide health insurance for their employees. Failure to do so currently results in a penalty, but the AHCA would remove all penalties. Still, many employers already offer insurance benefits, and will continue to do so, as it remains one of the top ways to attract and retain talent.
- It would delay the implementation of the “Cadillac Tax”. Under the ACA, there is a 40% excise tax, set to take effect in 2020, on the value of employer-sponsored health plans exceeding $10,200 for individuals and $27,500 for family coverage. The AHCA would push this date back to 2026. It would also end all other ACA-imposed taxes on employers.
- It would make health-saving accounts (HSAs) and FSAs more accessible. While the ACA increased the tax on HSA distributions for nonmedical expenses to 20%, the AHCA would lower it to 10%. It would also remove the current limits placed on contributions to HSAs and make the cap equal to the out-of-pocket maximums that apply to high-deductible health plans. The AHCA would also repeal limits imposed by the ACA on how much employees can contribute to flex-spending accounts (FSAs), and allow FSAs to be used for reimbursement for over-the-counter medications.
- It would remove additional medicare taxes. The AHCA would remove an ACA provision that added an additional 0.9 percent taxes on wages above certain thresholds.
- It removes the credit for small businesses that qualify to purchase options through SHOP. Under the ACA, qualifying small businesses could claim a credit for two consecutive years that would allow them to purchase ACA coverage through the Small Business Health Options Program (SHOP). The AHCA would remove that credit.
These are just a few of the changes that could impact employers if the AHCA passes in the Senate. The future of the bill and how it may be changed or amended, and whether or not it will pass at all, all remain unclear. Nonetheless, employers should be proactive in understanding the potential changes that could occur and be prepared to adjust accordingly.