ACA News & Publications

ACA Pathways: ACA Repeal Starts Now... What You Need To Know

March 09, 2017

Earlier this week, Republican leadership in the U.S. House of Representatives issued two bills to repeal and replace the Affordable Care Act (ACA) through the budget reconciliation process. These bills, which were issued by the Ways and Means Committee and the Energy and Commerce Committee, are collectively known as the American Health Care Act.

To become law, both bills must go through the legislative process, although a budget reconciliation bill can be passed with a simple majority vote. Debate on the legislation began on March 8, 2017, and as of today, after many hours of debate, both bills have cleared their respective committees, paving the way for a full House vote in the near future. If passed in the House, it will go to the Senate, where its passage in its current state is uncertain at this time. However, if passed by both the House and the Senate, the law would then go to President Trump for approval. It is important to note that a full repeal of the ACA cannot be accomplished through this process.

Summary of American Health Care Act's Provisions

If enacted, the new law would not repeal the ACA entirely, although it would make significant changes to key provisions. These changes include the following:

  • The ACA's employer and individual mandates would be repealed retroactively beginning in 2016. Relief is also provided from many other of ACA's tax provisions, including the following:
    • The effective date for imposing a 40 percent excise tax, known as the Cadillac tax, on high cost coverage would be delayed from 2020 to 2025.
    • The restrictions on using Health Savings Accounts (HSAs) and Health care flexible spending accounts (FSAs) for over the counter medications would be repealed beginning in 2018, as would be the additional Medicare tax on high-income individuals.
    • Health FSA contribution limits would be repealed effective for taxable years beginning January 1, 2018.
    • The annual health insurance providers fee also gets repealed going forward (currently there is a moratorium in effect on paying the fee for 2017).
  • Marketplace subsidies would be replaced with tax credits that could be both advanced to the individual for payment of current premiums, as well as refundable with the filing of his or her tax return. The tax credits would also be age-based (versus income based). Thus, older individuals would be eligible to receive a larger credit.
  • The Medicaid program would be fundamentally re-vamped. ACA's Medicaid expansion would be repealed by 2020, at which time the program would transition to being financed by a per capita allotment, similar to a block grant.
  • HSAs would be enhanced, including providing for an increase in the maximum HSA contribution limit, beginning in 2018, up to the maximum out-of-pocket limits allowed by law, as well allowing both spouses of a married couple to make catch-up contributions to the same HSA.
  • Key ACA provisions remaining under the draft bill include the following:
    • Cost-sharing limits on essential health benefits (EHBs) for non-grandfathered plans.
    • Prohibition on lifetime and annual limits for EHBs.
    • Requirements to cover pre-existing conditions (add if continuously covered will allow carriers to charge a higher premium).
    • Coverage for adult children up to age 26.
    • Guaranteed availability and renewability of coverage.
    • Nondiscrimination rules (on the basis of race, nationality, disability, age or sex).
    • Prohibition on health status underwriting.

What's Next?

While there is strong pushback from various health related organizations, such as the American Medical Association (AMA), and uncertainty about the bill's viability in the Senate, the President is actively involved in pushing this bill forward.

The bills will now be combined by the House Budget Committee, and sent to the House Rules Committee. It will then be sent to the full House of Representatives for a vote. If passed, it will be sent to the Senate for consideration and a vote. If passed with amendments, it will be sent back to the House of Representatives for a conference. A final version of the bill will be then sent to the President for his signature.

The American Health Care Act fact sheet can be found here.

A section by section summary and copy of the House Ways and Means Committee proposed legislation can be found both here and here, respectively.

A section by section summary and copy of the Energy and Commerce Committee's proposed legislation can be found both here and here, respectively.

Side-by-side Comparison to the ACA

Potential changes coming to the ACA are summarized in the following tables:

Affordable Care Act

American Health Care Act- DRAFT

Employer Requirements
  • Offer affordable coverage with minimum value to FT employees working on average 30 or more hours per week or else potentially face penalty
  • Remains but penalty for not complying is $0
  • Actuarial value requirement eliminated
  • Employer mandate penalty
  • Reduces $2,000/$3,000 penalties to $0, retroactive to 1/1/16. Can’t we just say, eliminates penalty?
  • Employer reporting/disclosure
  • Simplified reporting, but current reporting continues until new reporting mechanism is put in place
  • Increase wellness incentives to 30% (50% for smoking cessation) from 20%
  • No change
Premium Assistance
  • Subsidize cost of coverage through premium and /or cost sharing reductions determined based on household income
  • Ends subsidies and cost sharing reduction payments beginning in 2020
  • Creates new age-adjusted, refundable tax credits beginning 2020 per individual ($14,000 cap family)
    • $2,000 if < age 30
    • $2,500 if age 30 and < age 40
    • $3,000 if age 40 and < age 50
    • $3,500 if age 50 and < age 60
    • $4,000 if age 60 and >
  • Phase-out for incomes >$75,000 (indiv.)/$150,000 (family)
  • Advance payment of tax-credits permitted
  • Available for catastrophic health coverage
  • No premium tax credits to purchase plans that offer elective abortion coverage (although rider could be purchased)
Individual Mandate
  • Require health insurance for nearly all or pay penalty
  • Reduces penalty to $0 (retroactive to 1/1/16)
Medicaid/ CHIP
  • Expand Medicaid/CHIP
  • Ends ACA expansion by 2019
  • Establishes per capita approach to funding
Use of High Risk Pools
  • Temporary use of high-risk pools permitted (2010-2013)
  • Establishes program (Patient and State Stability Fund) from 2018-2026 for state use for a variety of initiatives, including high risk pools, reinsurance programs, subsidize providers or programs to promote access to preventive care services
  • Appropriates $15 billion per year for 2018 and 2019; $10 billion annual from 2020-2026 for a total of $100 billion, to be allocated among states
Plan Design
  • Cover 10 essential health benefit categories (individual and small group markets)
  • Still applies (except for Medicaid plans)
  • 90-day waiting period max
  • Retained
  • No pre-existing condition exclusions; continuous coverage requirement
  • No pre-existing condition exclusions
  • Continuous coverage required in individual and small group markets or else pay a penalty (pre-ACA requirement of less than 63 day gap)
  • Cover overage children to age 26
  • No annual or life time limits on EHB
  • 100% preventive coverage and limits on cost sharing
  • Provides for transitional relief for “grandmothered” plans, renewals through end of 2018
  • Retained
Health Savings Accounts (HSAs)
  • Leaves in place existing HSA rules
  • Increases maximum contributions to amount of deductible and out of pocket limit ( at least $6,550/$13,100 in 2018)
  • Catch up contribution for both spouses to same HSA account
  • Special rule for certain med expenses established before HSA as long as covered under HDHP
  • Requires high deductible health plan (HDHP)
  • Retained
  • No reimbursement of OTC drugs and medicines
  • Repealed
  • 20% excise tax on non-medical reimbursements
  • Reduced to 10%
  • Individual and employer mandate penalties
  • Not assessed beginning in 2016
  • Cadillac tax
  • Delayed until 2025
  • Increase in Medicare payroll tax on high cost individuals by .9% on wages in excess of $200,000 (individual) and $250,000 (married)
  • Tax on health insurance issuers
  • Excise tax on the sale of medical devices
  • New tax on pharmaceutical manufacturers
  • Excludes over-the-counter drugs and medicines from HSA and FSA reimbursement
  • Tanning tax
  • Net Investment Tax (3.8%)
  • Health insurer deduction limitation on compensation paid to an officer, director, or employee greater than $500,000
  • Repealed beginning in 2018
  • Elimination of deduction for Medicare Part D Subsidy Expenses
  • Repealed- reinstates business expense deduction for retiree drug costs without reduction for the subsidy amount beginning in 2018
  • Repeals increase in income threshold for medical expense deduction
  • Decreases adjusted gross income threshold from 10% to 7.5% for all taxpayers beginning in 2018
Premium variation (individual and small group markets)
  • Premium variation limited to 4 factors: age (3:1 ratio), geographical rating, family composition, and tobacco use (1.5:1 ratio)
  • Permits premiums to vary by age by a 5:1 ratio
Flexible Spending Accounts
  • Sets contribution limit at $2,500 (adj. annually for inflation) (2017 limit is $2,600)
  • Prohibits reimbursement of OTC medicines and drugs
  • Repealed beginning in 2018

For More Information
For more information about this ACA Pathways or about any other health care reform-related provisions, please contact your Burnham Benefits consultant or Burnham Benefits at:

Burnham Benefits

This ACA Pathways is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Readers should contact legal counsel for legal advice. The information contained in this ACA Pathways includes emerging health care news from a limited perspective and does not encompass all views. The information was selected from a wide range of sources selected on the basis of their potential impact on employers and/or their employee benefit plans. For more information, please contact Burnham Benefits.

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