On June 22, 2017, the Senate GOP published a "discussion draft" of the Better Care Reconciliation Act of 2017 (Better Care). As we write this alert, the draft of Better Care is being scored by the Congressional Budget Office, and there are rumors about possible amendments and votes. This alert is a quick summary of the draft's provisions that impact employers. As with our previous client alerts about the efforts to repeal and replace the Affordable Care Act (available here, here, and here), this one does not address other topics—like Medicaid or premium tax credits—that are important to us as individuals and to the country as a whole, but are not necessarily important to employers.
Brand New
- Individuals who are eligible for employer-sponsored coverage are not eligible for premium subsidies on the exchange. (We say "individuals" because this rule affects not only employees, but also spouses and dependents.) It no longer matters whether the employer-sponsored coverage is affordable. This rule, which would take effect on 1/1/20, will require many employers to do substantial re-thinking of their health coverage offerings.
- In general terms, Better Care makes it much easier for an association to offer a single, fully insured, group health plan to all of the association's employer members. The association plan provisions of Better Care would trump any state insurance law that prohibits such policies from being issued. The association plans would be rated on a large group basis. Regulations are to be issued within 6 months after Better Care is enacted, and the law would take effect 1 year after Better Care is enacted.
Changes That Are Similar to Those in the House Bill
- The employer mandate/penalties would be repealed, effective retroactively to 1/1/2016. This means that large employers would no longer be required to offer coverage to avoid a penalty.
- The individual mandate/penalties would be repealed, effective retroactively to 1/1/2016. This means that individuals would not have to secure coverage to avoid a penalty.
- States could seek waivers from the essential health benefits requirements. (The conditions for the waiver are much looser than in the House Bill.) If such a waiver were granted, large self-funded employers would be able to impose annual and lifetime limits on the benefits that are no longer essential. This provision would be effective immediately upon enactment.
- The Cadillac Tax would be delayed until 2026.
- The "extra" Medicare Tax on high-wage earners would be repealed, as of 1/1/2023.
- Health Savings Accounts (HSAs) would change in a number of ways, as of 1/1/2017:
- They could pay for over-the-counter medicine.
- The maximum contribution would increase to match the out-of-pocket maximum on high-deductible health plans (HDHPs).
- If established within 60 days after enrollment in a HDHP, the HSA could pay for expenses incurred after the effective date of HDHP coverage.
- Health Flexible Spending Accounts (FSAs) would change in a number of ways:
- They could pay for over-the-counter medicine, as of 1/1/2017.
- They would no longer be subject to a cap (currently $2,600), as of 1/1/2018.
- Employers with Medicare Part D plans would once again be able to deduct portions of their Medicare subsidy.
- Special information for small employers:
- The Small Business Tax Credit would be repealed, effective 1/1/2020.
- Credit would not be available if the employer's plan covered abortions, except to save the life of the mother or in cases of rape or incest, effective 1/1/2018.
Unchanged
- The tax treatment of employer-sponsored group health plans would not change.
- Employer reporting would still be required.
- Summaries of Benefits and Coverage (SBCs) would still be required.
- Insured plans would still have to include the essential health benefits.
- Employer plans would still have to include first-dollar preventive care benefits and coverage for children to age 26.
- Annual limits, overall or on essential health benefits, would still not be permitted.
- Lifetime limits, overall or on essential health benefits, would still not be permitted.
- Taking a pre-existing condition into account would still not be permitted.
If you have questions concerning the above, please contact the authors or any member of the Employee Benefits and Executive Compensation Practice Group.