The American Health Care Act Passes the House of Representatives

Yesterday (May 4, 2017) , the House of Representatives narrowly passed the American Health Care Act of 2017 (AHCA), which contains major parts that would repeal and replace the Affordable Care Act (commonly referred to as Obamacare or ACA).  The next obstacle the bill faces is making it through the Senate, which proves to be a formidable challenge.

The nonpartisan Congressional Budget Office has not had time yet to analyze the current version of the bill, but this is expected next week. The bill must now pass the Senate and could get pushed back to the House if it sees changes in the upper chamber.

In the meantime, here are some highlights we know about the bill based on how it is written today and how it would work:

• The AHCA bill would eliminate the requirement that people buy health insurance (known as the individual mandate).  
• The bill would eliminate penalties for large employers (50+ employees) that do not provide insurance to their employees.
• The bill would impose a penalty for people who don’t maintain continuous health insurance. The AHCA would create a penalty for people who have a gap in their health insurance of more than 63 days.  People buying insurance in the individual market who have a gap of 63 days or longer could be charged a “late enrollment penalty” by the carriers that could be up to 30% of the premium price.
• The bill would end Medicaid expansion.
• The bill would cut Medicaid spending.
• The bill would change how subsidies to buy health insurance are allocated.
• The bill keeps requirements that insurers must sell coverage to everybody.
• The bill would allow states to change which benefits insurers are required to provide to people who buy plans on their own. The AHCA would allow states to waive the current requirements of “Essential Health Benefits” (aka EHB) under Obamacare that are imposed on plans or allow states to set up their own list of EHBs that insurers must cover in the individual market.
• The bill would allow insurers to charge older people more than under the current law. The ACA limits insurers to charging older customer to 3 times a much as younger customers in the individual market. The AHCA expands that ratio to allow insurers to charge older customers 5 times as much as younger customers (it was 10 times prior to Obamacare).
• The bill would allow states to let insurers charge older people even more. Under the AHCA, states could seek a waiver from the federal government regarding the age ratios which would let them set their own ratios above the 5 times ratio set by the government.
• The bill would allow states to end requirements that insurers cover pre-existing conditions.
• The bill could lead to states setting up special insurance programs for high cost patients. The main requirements for a waiver on pre-existing conditions is that states must set up some kind of program to cover the most costly customers (aka high risk pools).
• The bill could impact the benefits covered by employer sponsored insurance.
• The bill would keep the insurance exchanges in place.
• The bill would allow kids to stay on their parent’s plan until age 26.
• The bill would repeal multiple taxes that helped fund the ACA.
• The bill would cut federal spending by hundreds of billions of dollars.
• The bill would return over the counter medications to the list of qualified medical expenses for the 2017 tax year.
• The bill would reduce the tax penalty on health savings accounts from 20% to 10% for distributions that are not used for qualified expenses.
• The bill would repeal the limitation of $2500 on health FSA contributions.
• The bill would increase H.S.A. contributions for a year to equal the maximum on the sum of the annual deductible and out of pocket expenses.
• The bill would allow both spouses to make catch up contributions in one H.S.A.

We will continue to keep you up to date on the bill as it progress through legislation.

90 Day Waiting Period Limit under ACA

Proposed guidance on the 90 day waiting period limit that was set in place by the Affordable Care Act (ACA) was issued on March 21, 2013 by the Department of Labor, Health & Human Services, and the Treasury (the “Departments”).  This rule will apply to plan years beginning on or after January 1, 2014.

The 90 day limit set under Health Care Reform prevents an eligible employee or dependent from having to wait more than 90 days before coverage under a group health plan becomes effective. All calendar days (including weekends and holidays) are counted when determining what date the employee has satisfied the 90 day probationary period.

The Departments have confirmed that there is no de minimis exception for the difference between 90 days and 3 months. Therefore, plans with a 3 month waiting period in their group benefit contracts (including the Section 125 plan document) will need to make sure these are amended for the 2014 plan year. In addition, plans with a waiting period in which coverage begins on the first day of the month immediately following 90 days will also need to be amended as coverage can not begin any later than the 90th day. Employers who prefer to use a first day of the month starting date for coverage rather than a date sometime mid-month should consider implementing a 60 day waiting period instead. If an employer runs into an instance where an employee is in the middle of their waiting period when the regulations become effective (on the group’s renewal anniversary date on or following January 1, 2014), the waiting period for the employee may need to be shortened if it would exceed the 90 days.

Caution: Employers sponsoring a group health plan should also be mindful of the rules under the employer “pay or play” mandate. The 90 day limit on waiting periods offers slightly more flexibility than the employer mandate. For instance, if an employer’s health plan provides employees will become eligible for coverage 90 days after obtaining a pilot’s license, that requirement would comply with the 90 day limit on waiting periods. However, the same employer could be liable under the employer mandate for failing to provide coverage to a full time employee within 3 months of their date of hire. So, employers sponsoring a group health plan should confirm that any plan eligibility criteria aligns with both the employer mandate and the 90 day limit on waiting periods.  

The Departments have also announced that HIPAA Certificates of Creditable Coverage will be phased out by 2015. Plans will not be permitted to impose any pre-existing condition exclusions effective for plan years beginning on or after January 1, 2014. This provision is also in effect for enrollees who are under age 19.  Plan sponsors must continue to provide Certificates through December 31, 2014 since individuals enrolling in plans with plan years beginning later than January 1 may still be subject to pre-existing condition exclusions up through 2014.