House Passes American Health Care Act
Last year on May 4, 2017 the House of Representatives passed a bill to repeal and replace the tax provisions of the ACA. The bill, H.R. 1628 the American Health Care Act included a provision to delay the ACA excise tax to 2026, among other provisions. Later in the year, on July 28, the Senate rejected the Health Care Freedom Act (also known as the "Skinny bill"), which was offered as a substitute amendment to the House-passed H.R. 1628, ending immediate efforts to repeal and replace the Affordable Care Act (ACA). Senate Majority Leader McConnell stated that the bill would be returned to the legislative calendar, meaning it can be brought back to the floor for consideration in the future. Looking ahead, it is possible that the House and Senate will hold public hearings and markups to continue the health care discussion and to make bipartisan modifications to the ACA. However, passage of a repeal and replace measure in a 2018 midterm election year is very unlikely.
A number of provisions in the ACA attempt to address the burden of health care costs on employers. One provision aimed at lowering these costs—namely the 40 percent tax on health care benefits—will have a number of serious, unintended consequences.
Beginning in 2022, the 40 percent tax will be applied to the aggregate cost of employer-sponsored health insurance coverage for employees that exceed $10,800 for individual coverage and 29,100 for family coverage. The aggregate cost will apply to more than premiums paid by employers and employees and will include benefits such as contributions to health savings accounts, contributions to flexible savings accounts, wellness programs, onsite medical clinics and retiree (or surviving spouse) coverage. The application of this tax will discourage employers from offering these benefits, create disincentives for continuing to innovate and dissuade employers from providing more information to employees and their families on the cost and quality of care. According to the Kaiser Family Foundation, 53 percent of large employers anticipate having at least one plan affected by the tax in 2020, and 93 percent will be affected by the tax in 2026.
Outlook:On Jan. 22, 2018 Congress passed and President Donald Trump signed into law a two-year delay on the ACA’s 40 percent excise tax “Cadillac Tax” on high-value health care benefits. The provision was part of the bill to restore funding to the federal government through Feb. 8, ending a partial government shutdown. The new effective date of the excise tax is scheduled for plan years beginning in January 1, 2022. In the interim, bipartisan, bicameral proposals to repeal the ACA excise tax has been introduced in the 115th Congress. In addition to congressional action, regulatory guidance from the Treasury department is anticipated on the excise tax.
Outlook: On March 2, 2017 a legislative proposal, H.R. 1313, the Preserving Employee Wellness Programs Act to encourage and reaffirm ACA compliant employer-sponsored wellness programs was introduced. The bill seeks to provide certainty to employers offering innovative ACA-compliant employee wellness programs and to eliminate confusion for employers offering employee wellness programs that lower health insurance premiums to reward healthy lifestyle choices. On August 22, the EEOC was ordered by the U.S. District Court for the District of Columbia to reconsider its wellness regulations. The EEOC is expected to release new rules in October 2019, and it could limit the incentives employers offer to induce employees to participate in wellness programs.
Under the ACA, employers with more than 50 full-time employees are
required to provide affordable group health insurance coverage to employees and
their dependents or face financial penalties. The ACA defines a full-time
employee as an individual who works an average of at least 30 hours per week.
This definition is inconsistent with standard employment practices in the
United States today, which typically define full-time employment as 40 hours a
week or more, and other federal laws. As a result, some employers have opted to
eliminate health care coverage for part-time employees to cover the costs of
providing coverage to full-time employees, while others have reengineered
staffing models to lower employee hours below the 30-hour threshold to avoid
Outlook: Bipartisan, bicameral legislation to amend the ACA’s definition of “full-time” employee has been introduced. Representatives Jackie Walorski (R-IN) and Daniel Lipinski (D-IL) introduced H.R. 3798, the Save American Workers Act, and Senators Susan Collins (R-ME) and Joe Donnelly (D-IN) introduced S. 1782, the Forty Hours Is Full-Time Act. These proposals would amend the Internal Revenue Code to modify the definition of a full-time employee from 30 hours to 40 hours of service per week for purposes of the employer mandate. The bill would not require employers to change their definition of full-time. Instead, the bill would provide employers the flexibility to determine what constitutes "full-time" (between 30 to 40 hours) for their business.
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