It’s been a big week for news on health care! News of changes in Indiana’s individual market have certainly provided a good deal of fodder for discussion among individuals and benefits professionals alike. We’ll be sharing more about those impacts as we continue to monitor the changes. For now, let’s turn our focus to the story that’s playing out on a national stage this week.
Thursday was a big day for opponents of the Affordable Care Act as the Senate introduced their version of a healthcare bill, called the Better Care Reconciliation Act, that would replace the ACA. This introduction in the Senate comes almost two months after the House of Representatives took the first step in repealing and replacing the ACA by passing an amended version of the American Health Care Act (AHCA).
The bill, which is 142 pages long, is certainly no done deal. Senator McConnell (Kentucky) is pushing for a vote on the bill for next week. Assuming unanimous opposition from Senate Democrats, the proposed bill can only lose two votes from Senate Republicans. Senators Rand Paul (Kentucky), Ted Cruz (Texas), Ron Johnson (Wisconsin), and Mike Lee (Utah) have voiced their dissatisfaction and opposition of the current bill and are collectively pushing for a revision. Their four votes would be enough to block the proposed bill from passing the Senate.
The Congressional Budget Office is the next stop for the Senate bill. The CBO, which is a non-partisan arm of Congress, says it could have a review of the bill back by as soon as Monday. Coverage continues to be one of the hottest topics for any new legislation after the CBO predicted that 23 million people would lose insurance under the AHCA passed by the House.
The Senate bill leaves some things in place from the ACA, while making changes to other areas. The overarching theme of the bill is a path to lower government spending.
What’s not changing from the ACA
- The insurance exchanges managed by the government would stay in place.
- Dependent children would be able to remain on their parents’ plan until they reach age 26.
- People with pre-existing conditions cannot be rejected or charged more by insurance companies.
- Funding for out-of-pocket costs for lower income policy holders will still be provided by the Federal Government.
Major points of the Better Care Reconciliation Act to impact employer plans
Repeal of the tax penalties related to the Employer Mandates
The Senate bill would eliminate the tax penalties related to the ACA’s Employer Mandate that requires that all employers with 50 or more full-time employees offer “affordable” and “adequate” health coverage or pay significant tax penalties. Moreover, the ACA defines a full-time employee as one who works 30 hours a week. For many, this exponentially expanded the workforce to whom employers had to offer coverage, as well as the overall cost and benefits provided.
A delay of the Cadillac Tax until 2026
The Cadillac Tax, a 40% excise tax imposed by the ACA on insurers and employers offering so-called high cost coverage, would be delayed until 2026 under the Senate bill, which is a year longer than the delay in the AHCA passed by the House. Delays of the Cadillac Tax have wide-spread support from constituents on both sides of the aisle.
Repeal of Medical Device and Insurer Tax
Like the AHCA passed in the House, the Senate Bill repeals the ACA tax provisions that impose a 2.3% tax on Medical Devices, as well as the tax on health insurers. Both taxes have a direct impact on group health insurance premiums and self-funded plan claims costs. Their elimination will likely result in reduction of overall employer healthcare costs.
Changes to essential benefits
Under the ACA, health plans must cover 10 essential benefits – outpatient care, emergency services, hospitalization, maternity and newborn care, mental health/substance abuse treatment, prescription drugs, rehabilitative care, laboratory services preventive and wellness services, and pediatric care (including oral and vision care). The Senate bill lessens the requirements of states to adhere to the ACA provisions on essential benefits, simplifying the process to secure waivers to drop areas of coverage. For employers, this could lead to increased decision making on plan coverage, especially employers with self-funded plans. Additionally, it adds a potential layer of complexity for employers with multi-state populations.
Employer reporting requirements remain in play, for now
The Senate bill leaves the employer reporting requirements under Section 6055 and 6056 in place. These reporting requirements have been widely viewed as overly burdensome for employers, and many if not most industry experts anticipate that these reporting requirements will be suspended with further regulatory action.
Enhancements for Health Savings Accounts (HSA)
The Senate bill, as with the AHCA that was passed through the House, allows those with single coverage to contribute $6,550 versus the current $3,400, and those with family coverage to contribute $13,100 versus the current $6,550. The Senate bill also loosens regulations around HSA utilization, allowing HSA funds to be used for over-the-counter medications and reducing the penalty for using HSA funds for a non-qualified medical expense to 10% compared to the current 20%.
As mentioned, the Senate’s Better Care Reconciliation Act is by no means a done deal. Given opposition from Senate Democrats and some Senate Republicans, it is likely that further revisions are needed to garner the support needed to pass the Senate. These changes certainly represent potential changes, as well as opportunities for employer plans; but at this point it’s too soon to build health plan strategies around the Better Care Reconciliation Act.