Potential ACA Changes Impacting Employers Under the New Congress
The ACA has remained, for the most part, intact since its passage nearly five years ago. Despite House Republicans voting to overturn the ACA more than 50 times, repeal efforts stalled in the Democrat-controlled Senate. With the Republicans now in control of both houses of Congress, 2015 promises to be a busy year with regard to ACA legislative efforts. While the Republicans are certain to pass ACA-repealing legislation and amendments, such legislation must survive a veto by President Obama. The following details some of the legislation that has been introduced in the new Congress.
The Patient CARE Act
On February 5, 2015, U.S. Senator Richard Burr (R-NC), Senate Finance Chairman Orrin Hatch (R-Utah), and House Energy and Commerce Chairman Fred Upton (R-Mich.) unveiled the Patient Choice, Affordability, Responsibility, and Empowerment (“CARE”) Act. Unlike previous failed attempts to simply repeal the ACA, if signed into law, the Patient CARE Act would repeal the ACA and replace it with new health care reforms, as well as a few current requirements under the ACA.
While the Patient CARE Act is unlikely to survive President Obama’s veto pen, its provisions will likely form the basis of more targeted legislation repealing or amending specific provisions of the ACA.
The Executive Summary of the Patient CARE Act states that all provisions of the ACA are to be repealed under the Patient CARE Act, except for the changes to Medicare. This includes the employer and individual mandates, fees (including annual fees on insurance companies), taxes (including the excise tax on the sale of certain medical devices), and the expansion of Medicaid.
Coverage Requirements in the Patient CARE Act
After repealing the ACA, the Patient CARE Act would reinstate certain ACA provisions with some or no modifications. For example, the ACA prohibits insurance companies and group health plans from imposing lifetime limits on essential health benefits. The Patient CARE Act would prohibit lifetime limits on the dollar value of benefits, although it is not clear whether such limits will apply to essential health benefits only.
The ACA also prohibits insurance companies and group health plans from refusing to renew coverage solely because of the health status of an individual, and it prohibits the retroactive termination of coverage, except in cases of fraud or misrepresentation. The Patient CARE Act would keep these provisions.
Similar to the ACA, the Patient CARE Act proposes to require health plans to offer dependent coverage up to age 26, but the Patient CARE Act would allow any state to opt out of this provision for the plans it regulates.
The ACA prohibits health plans from imposing pre-existing condition exclusions. The Patient CARE Act would also prohibit such exclusions, but only if the individual was continuously enrolled in a health plan for a period of at least 18 months, without a significant break in coverage. Essentially, the proposal’s pre-existing condition provision returns to a pre-ACA era when Health Insurance Portability and Accountability Act (“HIPAA”) standards governed such prohibitions.
Cost Savings & Tax Credits in the Patient CARE Act
The Executive Summary states that the policies and reforms set forth under the Patient CARE Act will lower health costs, and it appears that the primary cost savings would result from eliminating the ACA provisions that increase employer costs, such as the employer mandate and various employer fees and taxes. Indeed, the proposal’s primary means of generating revenue appears to be shouldered by individual taxpayers through a cap on the tax exclusion for employees’ health coverage (at $12,000 for an individual and $30,000 for a family). Currently, individuals are permitted an unlimited exclusion from their taxes for employer-provided health coverage. Under the proposal, an employee’s health benefit above the threshold would be treated as regular income for that employee, and the provision of health coverage would still be deductible for the employer.
The proposal does provide a targeted tax credit to certain individuals, however, that could be used solely for the purpose of helping to buy health care. Individuals working for a small business with 100 or fewer employees would be eligible to receive the credit. In addition, individuals who do not work at such a small business or a large employer and do not have an offer of health insurance coverage would also be eligible for the credit (to help them buy a plan in the individual market).
Interestingly, the proposal explains that, in the case of individuals who have a health tax credit but who fail to affirmatively choose a plan within a specified timeframe, states would be allowed to randomly assign the individuals to a default health insurance plan. As with many of the proposed provisions, individuals would be able to opt out of the default plan.
Additional Provisions in the Patient CARE Act
Rather than expand Medicaid, as the ACA does, the Patient CARE Act purports to reform Medicaid so that states would adopt a capped allotment, where federal Medicaid dollars would “follow the patient” based on the patient’s health status, age, and life circumstances. Moreover, individuals eligible for Medicaid would also be eligible for and have the choice to use the health tax credit to help purchase health coverage.
The Patient CARE Act would also permit individuals to use funds in their flexible spending accounts (“FSAs”), health savings accounts (“HSAs”), health reimbursement arrangements (“HRAs”), and Archer medical savings accounts (“MSAs”) to purchase over-the-counter medications. In addition, HSAs would be further enhanced by allowing HSA funds to be used for COBRA coverage and HSA-qualified policies, and spouses would be allowed to make catch-up contributions to the same HSA account.
Other Potential Changes
While the Patient CARE Act is the only alternative offered to the ACA, it is unlikely that it will be signed into law in its entirety. If it is not made law, potential changes to the ACA may primarily come in the form of piecemeal repeals. Since the Republican Party gained control of the House and Senate, a flurry of new legislation has been introduced to repeal various provisions of the ACA.
Bills that aim to undercut the ACA’s core ability to expand health care coverage will likely have less of a chance to survive a presidential veto. For example, the Reclaiming Individual Liberty Act (H.R.117, introduced by Representative Scott Garrett (R-NJ-5) on January 6, 2015), which aims to repeal the mandate that individuals purchase health insurance, will almost surely force a veto as the ACA depends on this provision to extend coverage to individuals not otherwise provided coverage by their employer. Along these same lines, the American Job Protection Act (H.R.248, introduced by Representative Charles W. Boustany, Jr. (R-LA-3), on January 9, 2015), seeks to repeal the employer mandate, a provision integral to the ACA’s success that requires large employers to offer health insurance to full-time employees or pay a penalty.
Other bills designed to chip away at smaller, less integral provisions of the ACA, however, appear to carry greater potential to change the ACA. For example, on January 13, 2015, Senator Bill Cassidy (R-LA) introduced S.157, which would repeal the medical device tax, and on January 16, 2015, Senator John Barrasso (R-WY) introduced S.183, which would repeal the annual fee on health insurance providers.
Whether any proposed legislation will become law and change the ACA is yet to be seen, but it is clear that the current health reform landscape is susceptible to change. Savvy employers should not only keep their eyes peeled for these potential changes but also confer with legal counsel to develop a strategy to quickly and effectively respond to the changes when they occur.
 Although legislative language is not yet available, a Patient CARE Act “Executive Summary” sets forth the proposed law.