On March 6, House Republicans introduced the American Health Care Act (AHCA). This is considered the first major legislative step in replacing the Affordable Care Act. If enacted, the AHCA would bring about a number of changes in the health care landscape for employers.
Before detailing the potential modifications, it is important to remember that the political process is slow and unpredictable, meaning the AHCA still has a long path to becoming the law of the land. The bill is currently progressing through the committee process then must be put to a vote in the House of Representatives and the Senate. While the law is still in its early stages, there are some indications it may face significant opposition in both houses of Congress. This uncertainty means that employers should continue to comply with the requirements of the Affordable Care Act.
Below is a summary of the most significant aspects of the AHCA that affect employers:
1. Repeal of tax penalties. The bill does not include an outright repeal of the employer mandate that requires employers with 50 or more full-time employees to offer health insurance. However, employers would no longer be penalized for a failure to comply with the mandate. The repeal of penalties would be retroactive to the 2016 tax year. So employers that may have been out of compliance this past year would not face penalties if this law is passed. At the same time, it is important to note that employers are currently still required to comply with the reporting requirements, although that may also change in the future.
2. Further delay of the Cadillac (Excise) Tax. Currently set to go into effect in 2020, the AHCA further delays implementation until 2025.
3. Repeal of limitations on contributions to Flexible Spending Accounts. The AHCA would repeal limitations on health FSA contributions for the taxable year beginning after December 31, 2017.
4. Increase to annual contribution limit for Health Savings Accounts (HSA). Also effective starting in 2018, the AHCA would increase tax-free HSA contributions up to the amount of maximum out-of-pocket expenses permitted under a high-deductible plan.
Those are just four of the multiple changes included in the AHCA. At this point in time, it is important to remember that this law is not yet in effect. Employers should continue to comply with the current rules under the ACA. If you have questions regarding ACA compliance, please contact MSEC for assistance.