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It may be time to review what health care was like before the ACA
SAN DIEGO—Many HR professionals may not remember what federal health laws preceded the Affordable Care Act (ACA).
Now that efforts to repeal and replace the ACA are advancing on Capitol Hill, it may be time for those HR practitioners to refresh their memories, said Stephanie Smithey, an attorney at Ogletree Deakins in Indianapolis, who spoke May 4 at the 2017 Workplace Strategies Conference here.
Smithey highlighted differences in health care before the ACA was enacted and after it took effect.
Some provisions of the ACA may survive. Before the ACA, children typically were eligible to remain on a parent's health plan until age 19 or until age 23 if they were full-time students. The ACA mandates dependent coverage to age 26. This part of the ACA survived in the bill that the House of Representatives passed on May 4, the American Health Care Act (AHCA).
It was common for sex reassignment procedures to be excluded from health coverage prior to the ACA. The ACA requires coverage of sex reassignment procedures and birth control, unless there is a religious basis for the denial, Smithey noted. The AHCA also would require this coverage, though an executive order from President Donald Trump on May 4 would expand the religious exemption, according to The Washington Post.
Before the ACA became law, exclusions for pre-existing conditions or higher premiums for individuals with pre-existing conditions were permitted. The ACA prohibits such exclusions and higher premiums. The AHCA would let states permit insurers to set higher rates for people with pre-existing conditions, according to NBC News.
Before the ACA, there were lifetime and/or annual limits on what the insurer would reimburse. After the ACA became law, lifetime and annual limits on essential health benefits were prohibited, Smithey noted. Timothy Stanton, an attorney with Ogletree Deakins in Chicago, who also spoke at the conference, noted that the AHCA would let states waive essential health benefits. As Chatrane Birbal, senior advisor for government relations at the Society for Human Resource Management, explained in a recent analysis, "Since the ACA's prohibitions of lifetime and annual limits and cap on out-of-pocket expenditures also only apply to essential health benefits, states [that are] granted a waiver would be able to define these protections as well." This could lead to the return of lifetime and/or annual limits.
Employers got to decide who was eligible and who was a full-time employee for purposes of health care coverage prior to the ACA. Eligibility often was limited to full-time employees and temporary workers, while seasonal workers were typically excluded. The ACA, however, mandates that employers offer coverage to full-time employees, which the ACA defines as people who have worked at a company more than 90 days and who work at least 30 hours a week.
It was common for insurance plans to favor highly compensated employees before the ACA, offering them deluxe health insurance not available to the rank and file. This advantageous insurance included a separate plan for senior managers, shorter waiting periods for eligibility and lower employee contributions. Under the ACA, insurance plans are subject to a nondiscrimination excise tax, known as the "Cadillac tax," though this is not in place yet. This 40 percent excise tax on employer-sponsored health coverage above certain thresholds for high-cost plans ($10,200 for individual coverage and $27,500 for family coverage) is now set to start in 2020. The AHCA would delay this tax until 2026.
Health flexible spending accounts (FSAs) were commonly limited to $5,000 per year and could reimburse over-the-counter drugs. Under the ACA, FSAs are capped at $2,500, as adjusted for inflation, and there is no over-the-counter reimbursement. The AHCA would repeal these annual limits and let FSAs, which set aside income for employees participating in a so-called cafeteria plan on a pretax basis to cover the cost of medications, reimburse over-the-counter medications.
Before the ACA, there was no penalty if an employer failed to offer coverage. The ACA imposes an excise tax for failure to offer coverage. Under the AHCA, the penalty would be reduced to zero.
Wellness incentives were capped at 20 percent of the cost of individual coverage prior to the ACA. Under the ACA, incentives are capped at 30 percent and at 50 percent for nonsmokers. This change was popular with employers. These incentives would remain in place, according to the Kaiser Family Foundation.
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"Mini-med" plans, also known as limited benefit plans, were common in the service industries prior to the ACA; now they are all but extinct, Smithey said.
Prior to the ACA, there were limited preventive care benefits with cost-sharing. The ACA requires minimum preventive benefits without deductibles or other cost-sharing. The requirement for plans to cover preventive benefits with no cost sharing would remain the same under the AHCA, according to the Kaiser Family Foundation.
Also, affordable coverage was not required. Now there is an excise tax for failure to offer affordable coverage, which is coverage where the employee's contribution for self-only coverage does not exceed 9.69 percent of his or her household income. While ACA employer penalties might be reduced to zero, the requirement to offer affordable and minimum-value coverage could remain the law of the land, according to Mark Wilson, chief economist at the American Health Policy Institute in Washington, D.C. And potential Employee Retirement Income Security Act claims might ensue for impermissible reductions in benefits, he cautioned.
Employers were not required to report to the federal government or employees about the coverage they were offering prior to the ACA. Now employers with at least 50 full-time employees must fill out Form 1095-C, which demonstrates that the employer has offered employees minimum essential coverage that is affordable. Under the AHCA, follow-up regulatory changes could reduce reporting requirements, according to benefit attorneys.
Smithey thinks some type of health care reform will emerge from the Senate, though she didn't predict what that might look like. Finally, she cautioned that, for now, the ACA remains in effect, so employers should still comply with it.
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