Republican ACA Repeal Plan - Impact on Employers

Trumpcare 1.0: A First Look at the GOP's Proposed ACA Replacement

This week, House Republicans introduced legislation to replace the ACA.

While much can (and likely will) change in the coming days, weeks and months as the bill is debated, here are five key provisions in the proposed American Health Care Act that could, either directly or indirectly, impact benefit professionals like you.

1. Tax Credit for Individual Market

The proposed legislation would provide tax credits to those who don’t have coverage through their employer, replacing the ACA's subsidy system, which has targeted a narrower set of lower-income people via the federal and state exchanges. The exchanges would remain in place, but far fewer people would be expected to use them due to the elimination of the subsidies.

The tax credits would be tied to age and income. People under 30 would be eligible for $2,000 each year, and the credit would rise incrementally to $4,000 for people over 60. But the credit would be reduced by $100 for every $1,000 in income over $75,000 for individuals, or over $150,000 for entire households. 

2. Cadillac Tax Delayed to 2025

People who do get health coverage through their employer would continue to enjoy a tax break under the GOP's plan - but only up to a certain point.

Limiting the tax preference for employer-sponsored insurance - also known as the exclusion - has long been a point of bipartisan agreement. But the ACA's so-called "Cadillac tax," which essentially serves as an indirect limitation on the exclusion, has been extremely unpopular on both sides of the aisle.

In recent months, Republican proposals have included a direct cap on the exclusion, where the cost of health coverage that exceeds a specified dollar threshold would be taxable to the employee directly - instead of being passed through to the insurer, employer or administrator, as is the case under the Cadillac tax.

However, the current GOP plan would actually keep the Cadillac tax in place. Instead of repealing the controversial ACA provision, the plan extends the Cadillac tax's effective date (which Congress had already voted to delay before) to Jan. 1, 2025.

3. HSA Expansion

Less surprising is the proposal's emphasis on health savings accounts (HSAs) as a powerful tool for health care consumers. The GOP's bill would, among other things:

  • Increase the maximum amounts that can be contributed to HSAs to the amount of the health plan's out-of-pocket limit
  • Allow both spouses to make catch-up contributions to the same HSA
  • Allow HSAs to cover medical expenses incurred up to 60 days before HSA coverage begins
  • Decrease the penalty for the use of HSA funds for non-medical purposes from 20 to 10 percent

4. Elimination of Employer Mandate PENALTIES

The penalty for the employer responsibility provision of the ACA - also known as the employer mandate - would be eliminated, and the same would go for the individual mandate. However, the mandates themselves would not be eliminated (presumably due to the Senate's Byrd Rule), meaning the ACA's employer and insurer reporting requirements would remain in place.

5. Preservation of Patient Protections

As often promised by President Donald Trump and other Republican leaders, the ACA replacement legislation would preserve two of the current law's more popular patient protections. Health insurers would still be prohibited from denying coverage or charging more money to patients based on pre-existing conditions. And dependents would still be able to stay on their parents' health plan until they turn 26.

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