House Bill to Repeal and Replace Certain Aspects of the Affordable Care Act

Brief Summary of Proposals that Impact Employer-Provided Health Coverage

On March 6th, House Republicans introduced a bill called the American Health Care Act to repeal and replace the Affordable Care Act.  The House Ways and Means Committee will hold a hearing on the revenue and tax provisions of the bill on March 8th – a very ambitious schedule.  Although the Republicans believe they can push this legislation through the House quickly, whether they will be able to do so remains to be seen. 

Below is a list of proposals in the bill that only impact employer-provided health coverage. Most are beneficial to employers and their employees; the main proposal being the repeal of any employer tax penalties for failing to offer "minimum essential coverage" (MEC) which effectively repeals the employer mandate.  The repeal is proposed to be effective January 1, 2016.

List of Proposals

  • Repeal assessment of penalties on employers for failure to offer MEC, effective January 1, 2016.
  • Temporary repeal of the "Cadillac" excise tax on high-cost plans until December 31, 2024, at which point it reappears.
  • Over the counter medications will once again be eligible for reimbursement from health FSAs, HSAs, Archer MSAs and HRAs as an excludable medical care expense, effective January 1, 2018.
  • The tax on distributions from HSAs and Archer MSAs for expenses that are not "qualified medical expenses" will be reduced from 20% to 10% for HSA distributions and 15% for Archer MSA distributions, effective January 1, 2018.
  • Repeal of any monetary limit on contributions to health FSAs, effective January 1, 2018.
  • Reimbursement of health expenses from an HSA established within 60 days of an employee's first date of coverage under a HDHP will be allowed even if the expense was incurred before the date the HSA was established, effective January 1, 2018.
  • For retiree medical plans, employers may again claim a deduction for retiree prescription drug costs subsidized by HHS payments, effective January 1, 2018.

The above list contains most of the current tax proposals applicable to employer-provided coverage and many of the proposals will lose tax revenue which Congress is required to make up elsewhere.  In other words, the bill must be revenue neutral.  The Congressional Budget Office is "scoring" the new bill right now to determine its revenue impact.  We anticipate that many changes will occur between now and passage.  Many of the ACA's most popular provisions have been preserved, such as the prohibition on pre-existing conditions and covering adult children until age 26. 

We will keep you posted on major developments as they unfold. If history repeats itself, we can expect a bumpy ride!