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House Passes AHCA Bill in First Step to Repeal and Replace the ACA

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On May 4, 2017, the U.S. House of Representatives passed the “American Health Care Act of 2017” or “AHCA,” which will now be sent onto the Senate. Employers should not take any actions based on the current language and instead continue to monitor the inevitable ongoing iterations of the bill.

The major provisions in the AHCA are the removal of both the individual and the employer shared responsibility penalties. In addition, the act postpones implementation of the Cadillac tax to 2025 and permits states to waive essential health benefit (EHB) requirements.

The AHCA makes a variety of changes to flexible health spending accounts (FSAs); removes the $2,500 contribution limit to for taxable years beginning after December 31, 2017, changes the maximum contribution limits to health savings accounts (HSAs) to the amount of the accompanying high deductible health plan’s deductible and out-of-pocket limitation and provides for both spouses to make catch-up contributions to HSAs.

The AHCA provides for a “continuous health insurance coverage incentive.” The incentive allows health insurers to charge policyholders an amount equal to 30 percent of the monthly premium in the individual and small group market, if the individual failed to have creditable coverage for 63 or more days during an applicable 12-month look-back period.

The AHCA returns permissible age band rating (for purposes of calculating health plan premiums) to the pre-Obamacare ratio of 5:1. This allows older individuals to be charged up to five times more than what younger individuals pay for the same policy, rather than up to the ACA limit of three times more.