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Republican ACA-Repeal Efforts Gaining Steam

Posted by: on March 13, 2017 in Corporate News Health & Safety Human Resources


Employee Benefits Compliance Alert
Republican ACA-Repeal Efforts Gaining Steam, What this could mean for you and your business.

Republican efforts to repeal the Affordable Care Act have now advanced in the House as GOP leadership officially unveiled its latest proposal. Although the proposal could be voted on at the committee level as early as this week, much work remains and a definitive pronouncement of what would be included in the final legislation is still unavailable. The Republican proposal ultimately will still rely on the budget reconciliation process, which only requires a bare Senate majority of 51, for enactment. Below are the possible compliance changes for your business if and when the ACA is repealed.

Early Details ACA Mandates (Employer and Individual): A central provision of the repeal proposal would convert the ACA’s employer mandate penalties from current monetary levels to zero dollars retroactive to January 1, 2016. Changing the penalty liability to zero has the effect of eliminating the employer mandate even though the underlying ACA requirement technically stays in place. The individual penalty is similarly zeroed out, but there are new burdens and potential financial exposure that could attach to anyone choosing to remain uninsured.

Tax Exclusion: Many employers will be relieved to note that the proposal (for now) does not include changes to the tax exclusion for employer-provided plans. Having noted that, many analysts caution that the exclusion topic may resurface at any time given revenue considerations.

Cadillac Tax: Also noteworthy on the revenue front is a provision further postponing the Cadillac Tax from 2020 to 2025. No threshold adjustments have been included in the proposal and so expect most group health plans to be subject to the excise tax in 2025.

Tax credits for health coverage purchases: Creates new tax credits for payment of health coverage that is reduced by 10% for individuals with incomes above $75,000 and households earning more than $150,000, if the individual does not have access to employer-sponsored coverage. Access to tax credits is phased out at higher income levels. The proposed refundable tax credits would be based on an individual’s age rather than household income as described below:

      • $2,000 in the case of an individual who has not attained age 30 as of the beginning of such taxable year,
      • $2,500 in the case of an individual who has attained age 30 but who has not attained age 40 as of such time,
      • $3,000 in the case of an individual who has attained age 40 but who has not attained age 50 as of such time
      • $3,500 in the case of an individual who has attained age 50 but who has not attained age 60 as of such time, and
      • $4,000 in the case of an individual who has attained age 60 as of such time.

The maximum allowable refundable tax credit cannot exceed $14,000 per year for any taxpayer. Advanced tax credits are available to low-income individuals to purchase coverage from an Exchange until January 1, 2020, with some amendments.
Medicaid changes: ACA’s Medicaid expansion would cap federal financial commitments. States would be subject to “block grants” (capped payment) based on Medicaid enrollment. ACA Reporting obligations: Employer reporting (e.g. Form 1094/1095) requirements will linger as tax credits hinge on access to offers of employer health coverage. Industry experts suggest that reporting could be simplified through regulatory procedures.
Amendments to health savings accounts (HSAs): Effective January 1, 2018, contributions to HSA accounts will not be based on the IRS statutory limits, but rather on the underlying HDHPs’ deductible and out-of-pocket limits.

Repeal of certain ACA taxes:
    The following caps and taxes are repealed as of the dates described below.
      • Effective January 1, 2020 - PCORI, Health Insurance Tax, Exchange surcharge in small group coverage.
        • Effective January 1, 2018 - Medical device manufacturer tax.
          • Effective January 1, 2018 - Deductibility of health expenses decreases from 10% to 7.5%
            • Effective January 1, 2018 - HSA excise tax penalty will revert to 10% from 20% for nonqualified distributions.
              • Effective January 1, 2018 - Repeals annual limits on health FSAs, hospital tax, tanning salon tax, Medicare tax for high-income earners, and the restriction from reimbursing over the-counter medications from an HSA, or health FSA.


Emplicity is closely monitoring the Republican’s efforts to repeal the ACA and will communicate further developments to keep our clients compliant and informed.

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NOTICE: Emplicity provides HR advice and recommendations. Information provided by Emplicity is not intended as a substitute for employment law counsel. At no time will Emplicity have the authority or right to make decisions on behalf of their clients.