On June 26, the Senate released a draft health care bill titled "Better Care Reconciliation Act" (BCRA). This Senate bill is a substitute amendment to the House- passed H.R. 1628, the American Health Care Act that was created under the budget reconciliation process and therefore, amends only the tax provisions of the ACA. This draft bill will change during negotiations before the Senate is expected to vote on the measure after the July 4 recess.
The fate of the bill remains uncertain as several Republican members have expressed concern over some of the provisions included in the draft. With 52 seats in the majority party, Senate leadership can only afford to lose two Republicans, with Vice President Mike Pence breaking the tie. The CBO estimates that the Senate proposal will reduce the federal deficit over the 2017-2026 period by $321 billion. The CBO estimates by 2026, 49 million people would be uninsured, compared with 28 million who would lack insurance that year under current law. Furthermore, the CBO report forecasts that 4 million Americans with employment-based coverage would initially lose their insurance under the Senate bill, presumably due to nonenforcement of the employer-mandate penalties.
Since the Senate bill is a draft, elements of the proposal will change. As of today, the following are key elements of interest to the HR profession and the workplace contained in the draft Better Care Reconciliation Act:
- Reduces Employer Mandate Penalty - Under the ACA, certain employers are required to provide health care coverage or pay a penalty. This bill reduces the employer penalty to zero for failure to provide coverage. While the penalty is removed, the employer mandate remains and will need to be repealed through future legislation. Effective date: After December 31, 2015, provides retroactive relief to those impacted by the penalty in 2016.
- Reduces Individual Mandate Penalty - Under the ACA, individuals are required to purchase health care coverage or pay a penalty. This bill will reduce the penalty to zero for failure to maintain coverage. While the penalty is removed, the individual mandate remains and will need to be repealed through future legislation. Effective date: After December 31, 2015, provides retroactive relief to those impacted by the penalty in 2016.
- Creates a Continuous Coverage Requirement and Includes Six-Month Waiting Period - Under the ACA, individuals are required to maintain health care coverage. This bill includes a continuous coverage requirement for individuals who have a break in health care coverage of for more than 63 days will have to wait for six months to obtain coverage through the individual market. Effective date: For special enrollments during 2018 coverage, the plan will begin on the day that is six-months after the date on which the individual submits an application, and for the 12-month period beginning with the first day of the plan year for 2019 and succeeding years.
- Delays Excise Tax on High-Value Health Care Plans - Under the ACA, beginning in 2020 a 40 percent excise tax will be imposed on high cost employer-sponsored health coverage benefits exceeding certain thresholds ($10,200 for individual coverage and $27,500 for family coverage). Effective date: This bill delays the effective date of the tax beginning after December 31, 2025.
- Repeals the Health Insurance Tax - Under the ACA, a tax is imposed on certain health insurers. Effective date: This bill repeals the tax after December 31, 2016.
- Repeals Increase of Tax on HSAs - Under the ACA, there is a 20 percent tax on distributions from a Health Care Savings Accounts (HAS's) that are not used for qualified medical expenses. This bill lowers the tax rate to 10 percent. The bill also allows individuals to use the HSA funds for over-the-counter medical items. Effective date: After December 31, 2016.
- Repeals the Limit on Contributions to HSAs and Increases Flexibility - Under the ACA, the amount an employer or individual may contribute to a HSA is limited to $3,400 for self-only coverage and $6,550 for family coverage. This bill allows individuals to contribute up to $6,550 and families up to $13,100 into a tax-free HSA. The bill also allows both spouses to make catch-up contributions to one HSA. Effective date: Beginning in 2018.
- Repeals the Limit on Contributions to FSAs - Under the ACA, the amount an employer or individual may contribute to a health Flexible Spending Account (FSA) is limited to $2,600, indexed for cost-of-living adjustments. Effective date: This bill will repeal the limit to FSA contributions for taxable years beginning in 2018. The bill also allows FSAs to reimburse over-the-counter medications beginning in 2017.
- Repeals Medicare Payroll Tax Increase - Under the ACA, there is a 0.9% increase in Medicare payroll tax above $200,000 for single filers and $250,000 for joint tax filers. Effective date: This bill repeals the tax beginning after December 31, 2022.
- Repeals the Elimination of Deduction for Medicare Part D Subsidy - Under the ACA, the tax deduction for employers who receive a government subsidy for providing retiree prescription drug coverage was eliminated. This bill reinstates prior law allowing employers to receive the tax deduction. Effective date: This change would be effective for taxable years beginning after December 31, 2016.
- Allows States to Waive the Essential Health Benefits (EHB) Requirements - Under the ACA, insurers are mandated to cover 10 essential health benefits. The ACA also allows states to seek waivers (known as Section 1332 waivers) from the law. This bill allows states that apply for the Section 1332 waiver to opt out of covering all or some of the 10 essential health benefits requirements. Effective date: For states that submit applications after the date of the bill's enactment into law, the amended Section 1332 will be applicable.
- Maintains Insurance Standards -This bill does not change the requirement that insurance carriers offer coverage to individuals with pre-existing conditions. In addition, other existing ACA insurance standards like providing coverage for adult children up to age 26, guaranteed renewability, no discrimination based on gender and community rating requirements, except as permitted by waiver, would remain the law. The legislation does not eliminate the employer reporting requirements under the ACA.
SHRM Position: SHRM believes that offering health benefits is an important way to recruit, retain and value talent. SHRM supports some of the provisions included in the bill such as the reduction of the employer mandate penalty, the inclusion of a six-year delay of the excise tax on health care plans and the repeal of the restrictions on the use and limitations on contributions to HSAs and FSAs.
The Society believes that congressional reforms should strengthen and improve the employer-based health care system. Health care reform proposals should: ensure that tax policy contributes to lower costs and greater access; preserve the federal Employee Retirement Income Security Act to allow for common benefit plans across state lines; encourage increased use of prevention and wellness programs; improve quality and transparency; and streamline medical liability laws to reduce health care costs.