ACA reform update: What the latest bill means to employer advocates

Last week, Congressional Republicans released the latest draft of the American Health Care Act (AHCA), their much-anticipated healthcare reform bill, after weeks (and, in reality, years) of prognosticating about the fate of the Affordable Care Act.

From the onset, it seemed a birthday party scenario for business advocates and employers; here was a strong GOP majority in both houses, a Republican president who had long-advocated for "repeal and replace" and a mostly confirmed, pro-business cabinet.

The metaphorical present was essentially sitting wrapped on the streamer-laden table, ready to be opened at a moment's notice. It was the shiny new action figure that had become the desire of so many groups: A business-friendly way toward better healthcare in the U.S. 

But on Monday, that unwrapped present was not as perfectly sculpted as had been imagined. And for many partygoers, it felt a lot like the present (or, in this case, the healthcare plan) they had received years before.

Basically, the AHCA drew mixed reviews, not just from the two political parties, but also from the multitude of perspectives that color business advocates in Washington, D.C.

HR Dive spoke with several employer advocates and observers during the bill's movement through House committees in order to get a sense of what they think the GOP's draft will mean for employers regardless of size.

What the road ahead looks like

Before we get ahead of ourselves, employers should know that the GOP isn't done yet.

Supposedly, what we've seen so far from the AHCA is only step one of three in the reform process, according to James Gelfand, Senior VP of Health Policy for the ERISA Industry Committee (ERIC).

Here's what that outline looks like in three stages, per Gelfand:

  1. Reconciliation Bill: This is the piece of legislation introduced to Congressional committees last week. It repeals both the employer and individual insurance mandates, and makes other changes to healthcare programs (perhaps, most controversially, to Medicare).
  2. Administrative Changes to ACA: These alterations can be made by President Donald Trump and members of the cabinet. Gelfand predicts these changes will be aimed at making the ACA more stable.
  3. Future Legislation: Yes, expect more in the way of drafted legislation. Observers hope Congressional members of the GOP will, among other things, lower costs, increase transparency and reform the delivery system.

This is crucial to understand given that the AHCA's current draft largely didn't tackle hot-button issues like specialty pharmacy. As litigators from Foley Hoag LLP wrote for JD Supra, "The legislation does not address the concepts of 'large employer' and 'full-time employment,'" among other specifications including "minimum essential coverage."

But there's a reason not all topics are being addressed: "Reconciliation is an imperfect vehicle for healthcare reform," Gelfand said. "There is still a lot of work to be done."

HR practitioners will have to wait for other aspects of healthcare to be addressed by those next two steps, which could take anywhere from months to years, assuming the AHCA survives the legislative process.

The case of the vanishing mandates

So, what does the AHCA as currently proposed do for employers? For starters, two really big things: Repeal of both the employer and individual mandates. The bill reduces the penalty for employers to $0, effectively negating it.

"I'm sure, at least on the face of it, that the employer mandate being repealed will be viewed as a good thing," said Kim Buckey, VP of Client Services for DirectPath, "on the assumption that the required reporting is going to go away as well." 

But, she noted, that assumption doesn't mean employers should stop collecting data for 1094-C and 1095-C reporting forms. Employers should wait for a definitive answer on the subject, keeping the data on hand.

Gelfand called the repeal a "game changer," particularly for  small- and medium-sized employers. "It doesn't solve all the problems with the employer mandate, but it does solve a couple of them really well," he said.

“My first reaction was, thank God the entire thing is not paid for with a tax on workers."

James Gelfand

Senior VP of Health Policy for the ERISA Industry Committee

Some have alluded to those issues that repeal of the mandate doesn't fully address. Dinesh Sheth, founder and CEO of Green Circle Health, said in an email that the mandate's repeal was "a given," but that deeper problems with employee wellness may still persist if not addressed properly.

"Otherwise, the systematic problems of reactionary care and poor lifestyle choices, which the previous mandate was trying to solve, will continue to cost employers hundreds of thousands of dollars each year," Sheth said.

Stabilization of the individual market, meanwhile, is also trending in a positive direction, Gelfand said. The bill's administrative changes in this area could prevent cost-shifting to employers. It also eliminates taxes on employers for items like medical devices and pharmaceuticals.

Keep the Cadillac in the garage

The AHCA also delays the implementation of the oft-maligned Cadillac tax until 2025. This might sound a bit strange to some employers; the tax has been one of the few points of agreement between members of the two political parties, and it was especially unpopular with businesses. So why not just repeal it?

Perhaps the best reasoning against repeal of the tax, according to advocates, is the fact that without it, there's no clear-cut route to fund popular parts of the ACA.

"There are provisions in this bill that are going to be expensive, like healthcare for younger adults," Buckey said. "They're going to have to be paid for somehow. That would be a source of revenue to cover a lot of the expensive components of the ACA."

Even so, Gelfand said an 8-year delay isn't a bad thing for employers — it just means the movement to end the tax isn't over yet.

"If you repeal the tax, you send that bill to the Senate, it gives rise to a point of order because of the vast amount of revenue it would bring in during those out years," he said. A previous reform bill, which would have repealed the Cadillac tax, was vetoed in 2016 by then-President Barack Obama.

But the current draft of the AHCA does provide a bit of relief for observers, especially since a previous leaked version of the bill would have paid for certain provisions with a cap on the employer-sponsored insurance tax break at the 90th percentile of plan premiums

"That would have potentially affected more people than the Cadillac tax," Buckey said. Even so, she cautioned that another source of revenue has to be decided upon.

"Employers must sit down and examine whether or not their current wellness program offers the proper healthcare functionality to empower their employees to take control of their healthcare data and overall wellness."

Dinesh Sheth

Founder and CEO of Green Circle Health

One lobbyist working on behalf of the Society for Human Resources Management (SHRM) is concerned about the possibility that employers would bear such a tax burden in the future, the Washington Business Journal reported.

Overall, Gelfand responded positively to the tax provisions as outlined in the draft. "My first reaction was, thank God the entire thing is not paid for with a tax on workers," he said. 

The outlook for employee plans

In the realm of plan design, the current draft of the reconciliation bill increases the maximum contribution limit that employers are allowed to make to their employees' health savings account (HSA) plans.

Buckey said that, though this provision "might be a bit of an administrative headache in the short term for employers" in terms of benefits communication and education, it should be a positive development in the long term.

Similarly, Gelfand said the increase to HSA contributions was a positive thing.

"For the past 15 years, the HSA limit has not been nearly enough to cover people's out-of-pocket expenses," he said. "Now, the bill is going to peg the contribution limit to the out of pocket max. That's going to allow people not to pay $3,000-$6,000 in out-of-pocket costs every year that they have to pay taxes on."

But, of course, the problem of whether employees are ready to take full advantage of those benefits persists, especially for younger employees. And employers will still have to push employees to strive for wellness in areas that legislation alone can't address.

"Employers must sit down and examine whether or not their current wellness program offers the proper healthcare functionality to empower their employees to take control of their healthcare data and overall wellness," Sheth said.

Nevertheless, the AHCA's provision could set the stage for a potential "renaissance" in plan design, Gelfand said. Plus, HSAs aren't a catch-all solution to better care. "Low income workers don't have money to put in an HSA," he said. "This is not a panacea, it doesn't solve all the problems for anyone."

Employers should realize that offering healthcare isn't just about providing the cheapest possible option, but the best possible care for employees.

"What I think folks have come to realize over the past 7 years is that different populations, different parts of the country, want and need different things," Gelfand said.

As of now, the bill could still see revisions as it moves through subcommittees, let alone before its placement on the president's desk. The Washington Post's bill tracker says GOP leaders are planning that the AHCA will be put up for a House vote by March 20.

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Filed Under: Comp & Benefits Legal
Top image credit: Flickr user Tobyotter