Senate Draft Health Care Bill - HR and Workplace Provisions

By Chatrane Birbal Jul 20, 2017

On June 22, the Senate released its initial discussion draft health care bill titled "Better Care Reconciliation Act" (BCRA), which was revised on July 13.  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.

The employer provisions included in the Senate bill are similar to H.R. 1628, which passed the House on May 4. 

As of July 13, 2017 the following are key issues of interest to the HR profession and the workplace, which are included in the draft Better Care Reconciliation Act:  

  • Reduces Employer Mandate Penalty - Under the ACA, certain employers are required to provide health insurance or pay a penalty. This bill reduces the employer penalty to zero for failure to provide health insurance coverage. While the penalty is removed, the employer mandate remains and will have to be repealed through future legislation.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 insurance or pay a penalty. This bill will reduce the penalty to zero for failure to maintain health insurance coverage. While the penalty is removed, the individual mandate remains and will have to be repealed through future legislation. Effective date: After December 31, 2015.

  • Creates a Continuous Coverage Requirement Six-Month Waiting Period - Under the ACA, individuals are required to purchase health insurance or pay a penalty. This bill includes a continuous coverage requirement provision that would require individuals who went without health insurance for 63 days to wait an additional six months until coverage bought through insurance exchanges takes effect. The only exceptions to the six-month waiting period would be for a child enrolled in coverage within 30 days of being born or for an adopted child under the age of 18 who is enrolled within 30 days of being adopted. This provision was added in revised bill draft on June 26. 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, there is a tax 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 that are not used for qualified medical expenses. This bill lowers the tax rate to 10 percent. The bill also allows individuals to use Health Savings Account (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 put $6,550 and families to put $13,100 into a tax-free HAS, indexed for inflation. The bill also allows HSA funds to be used to pay for qualified medical expenses for an account holder's children who are under the age of 27. In addition, 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 for individuals and $5,400 for families, 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 Small Businesses to Purchase Health Plans through Associations - The bill includes a provision that would allow small businesses to group together in fully-insured association health plans and would extend ERISA preemption of state insurance regulation of such established plans. The Department of Labor would have to certify Association sponsors as meeting certain requirements and the certification would have to be filed with states in which the association operates. Effective date: This new provision would go into effect one year after enactment of the law, if passed by Congress.
     
  • 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 allowed states to seek waivers (known as Section 1332 waivers) from certain requirements of the law. States that apply for the Section 1332 waiver could opt out of covering the 10 essential health benefits in plans. Effective date: For states that submit applications after the date of the bill's enactment into law, the amended Section 1332 will be applicable.

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.

Outlook: The fate of the bill remains uncertain. Senate Majority Leader Mitch McConnell (R-Ky.) delayed a vote planned for the week of July 17 following the disclosure of Senator McCain's medical procedure, which leaves the GOP short of support to advance the bill. In addition, Republican senators Susan Collins (Maine), Rand Paul (Kentucky), Mike Lee (Utah) and Jerry Moran (Kansas) have announced their opposition to the new version of the bill. 

In response, Senate Majority Leader McConnell suggested a new proposal to hold a procedural vote the week of July 24 on the House-passed health care bill, the American Health Care Act. If that procedural vote is adopted, an amendment will be introduced to revive a 2015 Reconciliation bill, which proposed to repeal the ACA tax provisions. The 2015 Reconciliation bill was passed by Congress but ultimately was vetoed by then President Obama. Senators Susan Collins, Shelley Moore Capito (R-W.Va.) and Lisa Murkowski (R-Alaska) have announced that they'll oppose such a measure. Senate leadership must retain the support of the remaining 50 Republicans to pass the bill, with Vice President Mike Pence breaking the tie. 

The non-partisan Congressional Budget Office released it's analysis on July 19 that if Congress passed a bill without a replacement plan 59 million Americans would be uninsured by 2026, the average health care premium would increase by 50 percent in 2026 and the federal deficit would decrease by $473 billion over ten years.  On July 20, the CBO released it's analysis of the draft Senate discussion bill, the Better Care Reconciliation Act. The CBO estimates that 50 million Americans would be uninsured by 2026, average premiums in the nongroup market will increase before 2020 and then lower thereafter. CBO estimates that the federal deficit would decrease by $420 billion over ten years.

From a SHRM perspective, employers & employees continue to believe that offering health benefits is important way to recruit, retain and value talent. Employers have offered health care benefits since WWII and the number of individuals insured by employer-sponsored coverage continues to grow. According to Kaiser's Employment Health Benefits 2010 Annual Survey, 157 million individuals were covered by employer-sponsored coverage. Today, over 177 million Americans and their families have health insurance through their employer.

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.


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