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Employer Health Insurance Legislation Update: The Better Care Act - June 26, 2017

Last week the Senate released draft legislation entitled “The Better Care Act.” aimed at repealing and replacing the Affordable Care Act.  Below is a summary of the Act and its potential impact on Iowa employers.


WHAT GOES?

ACA provisions repealed by The Better Care Act 


The following provisions would be effectively repealed by The Better Care Act commencing on January of the year cited below. For 2017, the provision is effective immediately.

  • Individual and Employer Mandate Penalties  (2016) - these are retroactive. No employer or individual would be penalized for not having coverage in 2016
  • 3 to 1 age rating (increased to 5 to 1 unless a state adopts a different standard) (2019)
  • Cost sharing subsidies for low income individuals (2020)
  • Medical loss ratio; however, states must define (2019)
  • Small business tax credits (2020)
  • Limit on health FSA contributions (2017)
  • Increased penalty on using HSA funds for non-qualifying medical expenses (2017)
  • Increase in Medicare payroll tax rate (2023); tanning bed tax (2017); health insurance issuer tax (2017); pharmaceutical manufacturers tax (2017); medical device excise tax (2017); chronic care tax (2017); annual limit on deduction for salaries in excess of $1 million for public corporations (2017); reduction in threshold for medical expense reduction dropped from 10% under ACA to 7.5% (2017)

WHAT STAYS?

ACA provisions retained by The Better Care Act

  • Premium subsidies for low income individuals; but significantly modified (2020)
  • Guarantee Issue and community rating
  • Actuarial values for health plans; however, states may eliminate
  • No annual and lifetime limits on essential health benefits
  • Prohibition on pre-existing condition exclusions
  • Limitation on cost sharing amounts; however, states may change
  • Requirement to extend dependent coverage to age 26
  • Coverage of preventive care with no cost sharing
  • Cadillac Tax (postpones until 2026)
  • 6055/6056 reporting
  • Health insurance marketplaces but states may eliminate (2018)
  • Prohibition on gender rating
  • Wellness incentives
  • Independent external review
  • Out-of-network emergency services covered as in-network
  • Summary of benefits & coverage and other transparency requirements 

WHAT IS LEFT TO THE STATES?

  • Essential health benefits; a state may redefine (2017)
  • A state may utilize a different age rating standard (2019)
  • Medical loss ratio requirements (2019)
  • Limitation on out of pocket maximums and deductibles (2017)
  • Actuarial values for health plans; a state may redefine (2017)
  • Health insurance marketplaces (2018)
  • Medicaid expansion (2020)

WHAT ARE THE REPLACEMENT REFORMS?

  • Establishes new small business association health plans allowing small businesses to buy insurance on the large group market if certified by the Secretary of Labor.
  • Premium subsidies would be available to individuals with income between 0 to 350% of the Federal Poverty Level to purchase insurance on the marketplace.   The amount of the subsidy is tied to the median priced marketplace plan with an actuarial value of 58%.  Required individual contribution amount for individuals with income above 150% of the FPL increases with age. Individuals offered any employer sponsored health plan regardless of affordability or minimum value are not eligible for the subsidies. Restricts eligibility to “qualified aliens” which does not include individuals in the US on worker visas or student visas.
  • States may use State Stability and Innovation grants to fund high risk pools.
  • Increases HSA contribution limits, increases catch up contributions, allows reimbursement of OTCs. (2018)
  • Increase Medicare Part B and Part D premium on beneficiaries with income above $85,000/individual and $170,000/couple.
  • Numerous Medicaid reforms. 

WHAT WOULD BE THE IMPACT OF THE BETTER CARE ACT ON IOWA EMPLOYERS?

Like the House legislation, the Senate bill would provide more flexibility for employers.  Large employers would no longer have to worry about being penalized for not offering affordable, minimum value coverage to their full time employees. As a result, large employers with 50 or more full time equivalents could redefine their health insurance eligibility criteria and premium contribution levels.  


Employers would still be required to provide annual reports on the coverage offered to their full time employees; however, it remains to be seen whether employers would continue to have to track employee hours in order to accurately complete these reports.  Small employers may be eligible to purchase insurance in the large group market by pooling with other similar employers which could result in lower costs. Employers would also be allowed to choose their own cap on health FSA contributions and could contribute more to employee HSAs. 


Many of the insurance market reforms implemented by the ACA would continue to apply; however, the Senate bill leaves some decisions to the states, including age rating, cost sharing limitations, essential health benefits and medical loss ratios. 


To the extent individuals lose Medicaid coverage or premium and cost sharing subsidies, Iowa employers may face more pressure to offer employees comprehensive coverage even without the employer mandate if the individuals they employ lose Medicaid coverage or the ability to purchase affordable, comprehensive coverage in the individual market.  It may also be more difficult for Iowa employers to fill part-time jobs as individuals opt for full-time benefit eligible positions.


If The Better Care Act passes it will either move to the House or to conference committee where House and Senate Republicans will try to resolve differences in the two bills.