Employer Takeaways From First Official Affordable Care Act Repeal and Replacement Proposal

Mar 10, 2017 | Written by: Leslie A. Parikh, Esq. | Share

On March 6, 2017, House Republicans offered their first official proposal for an Affordable Care Act (ACA) roll-back.  While much remains to be seen regarding the proposed draft, employers should be mindful of the following as matters unfold:

The Individual Mandate:  The ACA requires that all individuals have either health insurance, qualify for an exemption, or pay an individual shared responsibility payment.  Since President Trump issued his executive order directing his agencies to minimize to the extent possible the burden of the ACA, the proposed legislation, called the American Health Care Act (AHCA), would set the individual responsibility to $0 beginning with the 2016 tax year.  Thus, those who have already paid the individual mandate would be refunded if the ACHA is enacted. 

Elimination of the Employer Mandate Beginning With the 2016 Tax Year:  More importantly, for the purposes of employers, it is well-known that beginning with the 2015 tax year, the IRS began assessing shared responsibility payments against employers with 100 or more full-time equivalent employees.  Additionally, penalty payments applied to those employers who did not offer the insurance to their employees or who did not offer coverage that was affordable or provided minimum value.  Thereafter, beginning in 2016, employers with 50 or more full-time equivalent employees were also subject to this shared responsibility payment.  If the AHCA is enacted, the foregoing would become obsolete and reduce the employer shared responsibility payment to $0, beginning after December 31, 2015.  Therefore, no employers with 50-99 employees would ever be subjected to the penalty. 

Delay of Cadillac Tax Until 2025:  The ACA and the AHCA both impose a 40% excise tax on high-cost employer-sponsored health plans.  Under the Obama Administration, the taxes originally scheduled to be imposed in 2018 were subsequently delayed by Congress until 2020.  If the ACHA is passed, the delay would push things further into the future to 2025.

The Takeaway:  At this point, no action must be taken, however, employers should be kept abreast of the ongoing changes as they unfold.  I will be reporting on the progression of the ACHA as significant actions are taken.  I am also available for consultation on Human Resources and Employment matters affecting employees.