A leaked discussion draft of House Republican legislation to repeal and replace much of the Affordable Care Act (ACA) largely tracks earlier GOP proposals, including a cap on the employee tax exclusion for employer-provided health coverage. The February 10 draft includes the following proposals:
- Tax exclusion for employer-provided coverage capped. The draft would repeal the ACA's “Cadillac” tax now slated to begin in 2020. Instead, a cap would limit employees' federal income tax exclusion for the value of employer-provided coverage starting in 2020. (Employers would have additional payroll taxes if cost exceeds the cap.) Cost determinations for the cap would apply many of the same coverage inclusions and exclusions used for the Cadillac tax, but contributions to health savings accounts (HSAs) would not count. The cap is set at the 90th percentile of the employee and employer cost of group health coverage, as determined by the Department of Health and Human Services. The draft doesn't call for any cost adjustments for age, sex, or geography.
- Shared responsibility eliminated. Employer and individual shared-responsibility assessments would be effectively eliminated after 2015.
- Premium tax credits modified. Beginning in 2020, enrollees could get age-based premium tax credits ranging from $2,000 to $4,000 per year for individual coverage and unsubsidized COBRA. Individuals with access to employer coverage could not receive any tax credit.
- Employer's ACA reporting not addressed. The draft does not address ACA's current employer reporting responsibilities, so employers should plan to report for 2016. Beginning in 2020, health coverage providers would report on covered individuals and employers would report on premium costs to enable IRS administration of premium tax credits and the capped tax exclusion for employer coverage.
- ACA taxes repealed. ACA-related taxes would be repealed -- some at the end of 2016 and others in later years.
- Relaxed HSA limits and rules. Starting in 2018, permitted annual HSA contributions would increase to the maximum deductible/out-of-pocket limits for high-deductible health plans, and HSA rules would be eased in several respects.
- Medicaid expansion eliminated. Medicaid expansion would be repealed after 2019 and replaced with per capita Medicaid payments up to capped amounts.
These proposals will likely change before lawmakers introduce a bill, likely within weeks. In the meantime, Mercer will continue to advocate on behalf of our clients. Our recently released public policy point of view -- Health Reform and American Businesses: Critical Partner for Success -- demonstrates how important it is that the collective voice of employers be heard during the ACA ‘repeal and replace’ discussions and planning. You can make your voice heard through membership in plan sponsor and business groups or by contacting your congressional representatives in the House and Senate.