On Friday, March 24, 2017, the U.S. House of Representatives\u2019 Speaker Paul Ryan pulled from the floor the American Health Care Act (AHCA), the proposed legislation to repeal and replace the Affordable Care Act (ACA), once it was clear that the bill was short on votes to pass.\u00a0 Effectively, this means the AHCA will not survive to become law and, at this time, any future efforts to repeal and replace the ACA are uncertain.\u00a0 This may mean, as Speaker Ryan said shortly after the announcement that the bill was withdrawn, \u201cObamacare is the law of the land. We\u2019re going to be living with Obamacare for the foreseeable future.\u201d However, as of March 28, there have been reports that the House Republican leaders and the Trump administration have started renegotiations on legislation to repeal the ACA. At this time, there are no details about what may be in any renewed repeal legislation or the timing of its release or a vote.<\/p>\n
If enacted, the AHCA would have retroactively repealed the individual and employer mandate penalties, delayed the 40% \u201cCadillac\u201d tax on employer-sponsored health plans, made significant changes to the ACA insurance coverage and marketplace stabilization provisions, enhanced health savings accounts (HSAs), provided relief from many of the ACA\u2019s taxes and fees, and curtailed Medicaid reforms, among other things.<\/p>\n
The AHCA was intended to be Phase I of a three-phase approach to repeal and replace the ACA through the budget reconciliation process, which requires a simple majority vote in Congress.\u00a0 Phase II was envisioned to include regulatory relief by Health and Human Services (HHS) Secretary Thomas Price, and in Phase III legislation would be introduced to repeal the ACA market reforms, permit the sale of insurance across state lines, and effectuate other provisions that could not be addressed through the budget reconciliation process because of the Byrd rule, which limits reconciliation provisions in the Senate to provisions that affect government revenues and outlays.<\/p>\n
In large part, the bill failed because the more conservative wing of the Republican Party, known as the Freedom Caucus, was against the bill because of its preservation of certain ACA provisions.\u00a0 Prior to the vote on the bill, which was initially scheduled for Thursday, changes were introduced (via what was referred to as the \u201cManager\u2019s Amendment\u201d) to add concessions (such as accelerating the repeal of most of the ACA tax provisions) in the hope that the Freedom Caucus, representing more than 30 members, would vote in favor of the bill.\u00a0 However, when realizing that even those concessions were not enough, additional concessions, including the repeal of the federal \u201cessential health benefits\u201d definition were added.\u00a0 At that point, more moderate Republicans were voicing concerns.\u00a0 Late Thursday, President Trump issued an ultimatum, demanding a vote on Friday and threatening Republicans that the ACA would remain the law if Republicans did not back the AHCA.\u00a0 By Friday afternoon, it was apparent that a compromise could not be reached, and the bill was withdrawn (at President Trump\u2019s request) without going to a vote.<\/p>\n
Effectively, at least for the short term, the ACA, including the employer and individual mandates (including associated reporting) remains the law of the land. Until further notice, employers must stay the course on their compliance efforts.<\/p>\n
Consistent with the President\u2019s Executive Order issued immediately after his taking office, there may be pressure on HHS Secretary Price in the short-term to provide regulatory relief to the extent permitted by the ACA.\u00a0 However, it is unclear whether any such relief will focus on issues facing employer-sponsored group health plans.<\/p>\n
President Trump could remain firm on his ultimatum and not support any future efforts to repeal the ACA and test his theory that it will \u201cexplode.\u201d\u00a0 One way the Republicans may help hasten this is by choosing not to pursue a lawsuit filed by Congressional Republicans during the Obama administration that would de-fund the cost-sharing reduction subsidies paid to insurers to reduce out-of-pocket costs for low-income enrollees, which the Republicans have asserted are illegal.\u00a0 In that case, Republicans argued that Congress never actually gave the Obama administration funding for the program that\u2019s being used to pay insurers.\u00a0 A district court judge decided in their favor, but the Obama administration appealed the case.\u00a0 The case was delayed in February and is currently on hold, with an update due in May.\u00a0 Many believe these payments are essential for the stability of the insurance market. It remains to be seen whether the administration will drop the case and Republicans will fund the next round of subsidies in the short-term spending bill due at the end of April in exchange for a commitment by insurance companies not to abandon the market over the next few weeks.\u00a0 Many conservatives may view this course of action as \u201cgiving up\u201d on repeal and may not support it unless it is part of a larger repeal and replace effort.<\/p>\n
Initially, the Trump administration and other Republican leadership stated that they intended to move on to tax reform and other initiatives at the top of the Trump administration\u2019s agenda.\u00a0 However, there is nothing that could stop Republicans from trying to garner support for another repeal effort, and, in fact, there have been recent reports that the House Republicans and the Trump administration are back in negotiations on repeal legislation.\u00a0 The details and timing of such renewed efforts have yet to be released.\u00a0 It is possible that the Republicans may offer piecemeal legislation to address certain components of the ACA, rather than a complete repeal.<\/p>\n
Taxes associated with the ACA will remain untouched while Congressional Republicans work on reforming the rest of the tax code, House Speaker Ryan said following the March 24 decision to pull the AHCA from a planned House vote.\u00a0 According to the latest Congressional Budget Office report, repeal of the ACA taxes would have reduced revenues by nearly $1 trillion over the next ten years.\u00a0 Republicans believed that repealing the ACA taxes first and being able to offset them with ACA spending cuts would have made tax reform easier.\u00a0 According to Ryan, failure to pass the AHCA \u201cjust means the Obamacare taxes stay with Obamacare. We\u2019re going to go fix the rest of the tax code.\u201d<\/p>\n
However, ACA tax repeals may be part of the larger tax reform effort if other tax expenditures would be used to finance the repeal.\u00a0 One option that has been suggested is instituting a cap on the exclusion for employer-sponsored health coverage.\u00a0 Initial leaked drafts of the AHCA had included such a provision but were not included when the bill was introduced earlier this month after there was political pressure by employer groups to eliminate it.<\/p>\n
While it is not quite clear yet that the dust has settled, employers should proceed with the expectation that the IRS will begin enforcing the employer mandate via the ACA reporting forms, and prepare for the return of the health insurance industry tax (HIT) in 2018 (the HIT affects fully-insured medical, dental and vision plans but was under a one-year moratorium for 2017).\u00a0 Lastly, the Cadillac tax is expected to be effective in 2020, so employers should also continue evaluating how their plans may be impacted.\u00a0 Of course, it\u2019s certainly possible that the Cadillac tax will be delayed again in the future.<\/p>\n
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Stacy Barrow, Esq.<\/em>
\nCompliance Director<\/em><\/p>\n