Don't HR Alone #12 - ACA/AHCA Updates
Reporting requirements here to stay under AHCA, although perhaps will become simpler, expert says
The American Health Care Act (AHCA) (H.R. 1628) passed the House by a narrow margin on May 4, 2017. While the bill would not repeal the Patient Protection and Affordable Care Act’s (ACA) employer mandate, it would reduce the employer shared responsibility penalties to zero, retroactively effective to 2016. During a recent Aon webinar, A Closer Look: Health Care Reform in the First 100 Days of the Trump Administration, Kerri Willis, senior vice president of Aon Health & Benefits Legal Consulting Group, noted that while the employer mandate penalties would be eliminated, “the AHCA does not repeal the employer reporting requirements.”
Tax credits, not subsidies. The reason why the employer reporting requirements would not be removed under the AHCA is because instead of the ACA-created tax subsidies to purchase coverage, the AHCA would provide tax credits. The AHCA modifies and then repeals the Code Sec. 36B premium assistance tax credit, and creates an advanceable, refundable tax credit for individuals to purchase state-approved, major medical health insurance and unsubsidized COBRA coverage. Eligible individuals must not have access to government health insurance programs or an offer of health insurance from any employer. The credits would be adjusted by age and range from $2,000 for those younger than 30 years old to $4,000 for those age 60 or older.
“One thing to keep in mind about these tax credits is that they are only available to individuals who are not eligible for other coverage, such as coverage through an employer-based plan,” said Willis. “This is one of the reasons why employer reporting requirements do not go away. Since individuals are only eligible for these tax credits if they don’t have an offer of coverage from their employer, the IRS needs a way to know who has been offered coverage through their employer and who hasn’t. So there is going to have to be some sort of reporting from employers to the IRS to let them know who is eligible for these tax credits.”
Simplified reporting. The ACA requirements for employer reporting are complex. “The expectation would be that the reporting would get much simpler and much more streamlined under the AHCA, so the complicated 1095-C and 1094-C forms that employers have grappled with over the last couple of years would go away,” Willis concluded. “The process would be much easier but, of course, we have a long way to go to see how that would actually play out if the legislation were passed.”
Employers expect to keep popular ACA provisions, despite potential for law’s repeal
As the Senate will now take up the task of perhaps repealing and replacing the Affordable Care Act (ACA), employers expect to retain some of the law’s popular provisions, even if they are not required to by a new law, according to a new survey by Willis Towers Watson. Six hundred and sixty-six employers responded, representing 9.3 million employees. While approximately one-third of employers are not sure of future plans, more employers plan to keep popular provisions than make changes.
For example, if unlimited lifetime benefits are repealed, employers are more than three times more likely to keep them in place than they are to reinstitute lifetime dollar limits: 50% versus 15%. In addition, if contraceptive care at a 100% benefit is repealed, employers are nearly six times more likely to maintain coverage at that level than they are to reduce it: 59% versus 11%.
These findings stem from the “Willis Towers Watson 2017 Emerging Trends in Health Survey,” which also found that if the age 26 dependent coverage rule were to be repealed — which is not expected in a potential replacement bill — more than twice the number of employers would keep the eligibility age at 26 than lower it: 48% versus 22%.
“Employers are more likely to retain some of the popular ACA benefit provisions because of their positive impact on employee engagement and the potential for changes to be viewed negatively in the context of overall rewards,” said Julie Stone, a national health care practice leader at Willis Towers Watson. “As we see an increased focus on employee productivity, employers will be careful about the implications of change, not just from a dollars and cents perspective, but in terms of employee perceptions.”
Change to broader health strategy. Employers are also unlikely to make changes to their broader health care strategy if certain provisions of the ACA that have been unpopular with employers are repealed. For example, just 6% of employers said they are “very likely” and 13% said they are “somewhat likely” to make changes if the employer mandate is repealed. The employer mandate requires employers to offer affordable, minimum-value coverage to full-time employees or pay a penalty.
If restrictions on offering stand-alone or premium health reimbursement accounts for active employees are eliminated, just 4% of employers are “very likely” and 13% are “somewhat likely” to make changes to their current health care strategy.
Even if limits are placed on the dollar amount of employer-sponsored premiums that are exempt from federal income and payroll taxes, relatively few employers would make broad changes. Just 16% of employers are “very likely” and 31% are “somewhat likely” to make changes if the tax exclusion is capped.
“Employers are confident they’ll be providing health care for the near future and are hesitant to commit to changes until they see the big picture,” said Stone. “Whatever provisions a new law might include, most employers will stay on their current path to build a high-performing health care program. Improving plan design value and creating program efficiencies will remain core components of an effective long-term health care strategy.”