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“Live” From Capitol Hill – The ACA “Repeal and Replace” Initiative!

                      Last week, I joined nearly a thousand other Employee Benefit Professionals in the nation’s Capital for the National Association of Health Underwriters (NAHU) annual Cap Con conference. As many of you know, this annual event is the “pinnacle” opportunity each year for me to personally relay YOUR health care challenges and concerns as an employer sponsoring “unaffordable” health care to your valued employees. Our face to face meetings this year with our Michigan Congressional Representatives and Senators left an unmistakable impression  and palpable feeling of imminent change surrounding the Affordable Care Act (ACA). The timetable promised by the GOP to deliver on the “Replace” bill could be a matter of just a few short weeks away. My concern has been that Congress may move too quickly to “Repeal” the ACA without first developing a workable plan to “Replace” it. Over the four days of meetings and our collective input of NAHU experts, along with government and industry related specialists, I feel more confident having presented proposals that seem much more opportunistic to me than many other ideas that have been published. The following will summarize the most important content derived and observed from our intensive group sessions and meetings with members of Congress on the Hill. First, they’ve made it VERY clear that “Repeal-and-Replace: would be a massive undertaking, requiring several years to fully execute. Many of the current ACA provisions we feel with certainty that will remain intact include; no exclusions for pre-existing conditions; the ability of children to remain on their parents’ plan to age 26; and some form of redefined tax credits for the individual markets. Second, It seems certain that the individual marketplace will be around for at least one more year, but insured individuals and families continue to game this complicated system, hopping in and out of insurance coverage before reconciliation documentation can catch up with them. The individual marketplace is one of the biggest financial drains to OBAMACARE.  It is rife with “waste, fraud and abuse.” That said, subsidies are unlikely to disappear entirely. They will be maintained through tax credits of some type for the foreseeable future. It’s also not reasonable or fair to expect the average citizen to fully understand the confusing rules, eligibility requirements as well as the complicated definitions and tax penalties. Expect to see significant changes relating to this problem. The KEY to fixing the Exchange Marketplace is to first “stabilize” the individual market and take drastic steps to eliminate adverse selection by restructuring the individual market tax credit to improve its purchasing power for younger enrollees. The mass exodus of insurance carriers from these state and national exchanges is further eroding competition, and significantly increasing costs and out of pocket exposures to those that can “afford” to purchase individual healthcare Third, I’m anticipating that the current employer reporting method of retrospectively reconciling coverage through 1095 forms will be transformed into a prospective method of testing for plan affordability so that employees who choose a subsidized plan will not be hit by a huge, unexpected tax bill if the IRS determines they should have been on their employer’s affordable plan. It appears the government may try to minimize or eliminate the “Pay-or-Play” employer mandate penalty simply by deciding not to enforce it. This change may be altered at some date in the future in some piecemeal fashion. In the meantime, current ACA reporting requirements will remain “as is” until the “Replace” bill is fully engaged. NAHU- Our Recommendations One of the most crucial concerns of employers and NAHU is the need to maintain the Exclusion of Employer contributions from income taxes for an employee’s health insurance paid by their employer and maintain the tax exempt status for both parties. This “approach” was recently floated by GOP Congressman Paul Ryan to help “fund” the cost of the “Replace” bill. This would require employees to pay income tax on their employer provided health insurance by placing a “cap” or ultimately eliminating this current exclusion.  The NAHU is strongly opposed to this proposal. The facts are clear with nearly 175 million citizens that receive their health care through some form of an employer “subsidized” sponsored plan and taking away this significant tax benefit would be no less than catastrophic. The current exclusion “encourages” employers to offer health care that typically costs far less due to “group” purchasing power than individual coverage. Deductibles and out of pocket exposures are also far less than the average individual plans purchased in the marketplace.   The whole ACA “Repeal and Replace” initiative is extremely complex and confusing, and NAHU wants to ensure that sensible provisions are incorporated during this imminent  process of change. Our presence last week on the Hill with the NAHU has made the following recommendations to Congress:   For Individuals
  • Keep premium tax credits, cost-sharing tax credits and tax credits to territories until an alternative is available.
  • Allow tax credits to be used outside of the exchange if fewer than two choices are offered in a state.
  • Replace the ACA tax credit with an age-rated, flat, refundable and advanceable credit.
  • Allow anyone to buy catastrophic-category coverage, regardless of age or income.
  • Stabilize the Market – Tighten open enrollment and special enrollment periods to reduce adverse selection, and require documentation for special enrollment.
  • Adjust rules to permit open enrollment anytime for lifestyle changes, as long as the individual hasn’t gone more than 60 days without coverage.
  • Allow states to be eligible for funding for new hybrid high-risk pools.
For Businesses
  • Allow the small-business tax credit to continue for two years.
  • Increase flexibility for HSAs. Allow for a limited number of office visits to be covered before the deductible each year and increase amount that can be funded to an HSA account.
  • Preserve the Employer Exclusion. Over 175 Million Americans are covered under some form of employer sponsored plan and removing the tax preferred treatment would create a devastating affect to disposable income and insurance markets.
  • Minimize or fully eliminate the overwhelming employer reporting requirements
  • Eliminate the Employer mandate provisions and penalties
Other Reforms
  • Repeal the Health Insurance tax.
  • Repeal the Excise/Cadillac tax.
  • Repeal the medical loss ratio requirement for carriers.
Creative Benefit Solutions continues to monitor and study the rapidly mounting changes proposed for “Repeal and Replace”. If you have questions regarding how these changes may impact your company, please contact us at (248) 641-2722. Be sure to also follow us on Twitter, Facebook or LinkedIn for up-to-date posts on current developments in Health Care Reform, HR Technology and other important Compliance Developments. Respectfully, Greg Liposky, ChFC, CLU President