In the last few weeks we have talked to hundreds of employers about the American Health Care Act (AHCA), which was proposed in the U.S. House of Representatives on March 6. Many of you have asked about the AHCA, how it might impact the Affordable Care Act (ACA), and what you should be doing given the potential for the AHCA to change the ACA.
It was widely reported last Friday that the AHCA failed to make it through the U.S. House of Representatives. As a result, the Affordable Care Act remains the law, which means employers must remain focused on its compliance. For example, the ACA’s “employer mandate” gives large employers a choice between offering certain levels of health care coverage to their full-time employees or paying certain penalties. The AHCA would have zeroed out those penalties. Now that the AHCA has failed, the employer mandate remains. Thus, employers must continue to focus on identifying full-time employees – generally, those who average at least 30 hours per week – and offering sufficient coverage to avoid the employer mandate penalties. Employers should also remain focused on complying with the ACA’s reporting rules, which work hand-in-hand with the employer mandate.
Similarly, the ACA’s Cadillac tax remains. The Cadillac tax is a 40% nondeductible excise tax on employers who provide high-cost coverage to their employees. It was originally set to be effective in 2018 but was later delayed and is now set to become effective in 2020. The AHCA would have delayed the Cadillac tax by another five or six years. Now that the AHCA has failed, the Cadillac tax will go into effect in 2020.
This also means that most individuals must maintain sufficient health insurance coverage in order to avoid the individual mandate penalty. The ACHA would have zeroed out the ACA’s individual mandate penalty, which gives individuals a choice between maintaining health insurance coverage or paying a penalty. Thus, it’s important to note that the coverage you provide to your employees likely helps them avoid the individual mandate penalty, which is also here to stay.
While President Trump has indicated that his efforts will now focus on tax reform legislation, it is possible that future tax reform legislation might make some changes to the Affordable Care Act. For example, it will be interesting to see if the tax reform legislation is drafted to delay or repeal the Cadillac tax, which is unpopular among many Republicans and Democrats. But for now and for the foreseeable future, the ACA remains.