Democrats could literally be heard singing “Na, Na, Na, Na, Hey, Hey, Goodbye” after House Republicans passed the American Health Care Act (ACA), a bill that aims to repeal and replace much of the Affordable Care Act (ACA). Why the heck would Democrats be singing this song since Republicans are one step closer to getting rid of their signature law? It turns out they were taunting House Republicans who they think won’t get reelected now that they voted to pass the AHCA.

 

Everyone now wants to know what the difference is between the AHCA and ACA. That’s easy. It’s the letter H. But really, there’s a lot more to it. These are the big takeaways from the House bill. Please keep in mind the Senate may make some drastic changes to this bill.  

 

Individual Mandate. You don’t have insurance; you won’t have to pay a penalty to the government. However, if you’re uninsured for more than 63 days, you can be charged a 30% late enrollment penalty in the individual market or be underwritten based on your health status, depending on which option a state wants to pursue.

 

State Waivers. States can request a waiver to 1) increase the age rating ratio to 5:1, and 2) use health status as a rating factor instead of a late enrollment penalty, and 3) specify their own essential health benefits. To request waivers, states must implement a high-risk pool plan or similar program. Federal funding would be available to help finance the cost of a high-risk pool plan. 

 

Subsidies. Cost-sharing reduction subsidies that help reduce deductibles and copays are eliminated. Premium tax credits are preserved but in a different way. Under the AHCA, you would be provided a fixed dollar amount to purchase coverage. That dollar amount would range between $2,000 - $4,000 per person, and the amount of the credit would primarily be based on age. Families could receive a credit of up to $14,000. The credits would start to be phased out for people earning more than $75,000 ($150,000 for joint tax filers), and the credit would not be available to people who have access to employer-sponsored or government health insurance programs, like Medicare. The credits could be applied towards any plan a state approves, such as an on-Exchange plan, off-Exchange plan, or COBRA.   

 

Employer Mandate. The Employer Mandate is eliminated under the AHCA, but it’s reporting requirements are not. Future regulatory guidance could simplify or suspend the reporting requirements. 

 

ACA-Imposed Taxes. There are approximately 20 direct and indirect taxes imposed by the ACA. The AHCA would repeal all but one of those taxes. The Cadillac Tax would remain, but its implementation date would be delayed until 2026. 

 

HSAs and FSAs. HSA contribution limits would approximately double, and employers could decide how much employees can contribute to an FSA. The requirement to get a prescription to make an over-the-counter drug an eligible expense would be scrapped.  

 

Medicaid. Medicaid expansion funding would eventually be cut, and future Medicaid funding would be converted to a fixed, per capita amount or states could elect to receive block grants. Additional funding would be available to states that imposed a work requirement to non-disabled, non-elderly and non-pregnant adults.  

 

Medicare. Medicare is essentially untouched.

 

 

The materials contained within this communication are provided for informational purposes only and do not constitute legal or tax advice.