ACA Watch | May 4, 2017

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ACA Watch | May 4, 2017

ACA Watch May 4, 2017

A narrow vote

The American Health Care Act (AHCA), was passed in the House of Representatives today by a narrow margin vote
of 217-213
(New York Times, subscription req.)

Although the AHCA was previously pulled prior to a vote in March, a lot has happened over the last week to persuade remaining members of the House to support the legislation.  Next, the AHCA will move over to the Senate. It will likely go through further changes as bills are meshed together, and will likely face another tight vote.

Today’s vote is one step closer to the repeal and replacement of the Affordable Care Act (ACA). Keep in mind that officially, nothing has changed yet with the ACA, which remains the law today.

Another bill called HR 2192 was passed today as well, which will affect State waiver provisions for Congress members. This bill would amend the Public Health Service Act to eliminate the non-application of certain State waiver provisions to Members of Congress and congressional staff.


Biggest changes in the GOP bill

  • Return of High Risk Pools
  • Tax credits based upon age
  • Coverage mandates dropped
  • Medicaid funding overhauled
  • Obamacare taxes eliminated


What did the amendments change?

The Upton Amendment to the AHCA would provide $8 billion dollars over 5 years for high risk pools; intended to help patients with pre-existing conditions. (House of Representatives)

The MacArthur Amendment to the AHCA would allow state waivers to opt out of certain ACA requirements. States could apply for waivers to reduce premiums, increase health insurance enrollment, stabilize markets, increase choice of health plans in that State, and stabilize premiums for people with pre-existing conditions (ECFC.) It was this amendment that first received approval from the House Freedom Caucus. It also gained support by those previously opposed: Ways and Means Chairman Brady (R-TX), Energy and Commerce Committee Chairman Walden (R-OR), and other influential conservative groups.

To comply with Senate reconciliation rules, Rep. Martha McSally's (R-AZ) bill H.R. 2192 to amend the Public Health Service Act was considered as separate legislation, rather than an amendment. This bill affecting Congress members and staff will likely be meshed with the AHCA once on the Senate floor.


4 ways the AHCA could affect consumer
directed health care

The AHCA bill has an undetermined amount of time before it could be passed through the Senate. However, it may be good for benefits professionals to be aware of which changes could occur. While many of the changes would help the benefits industry, significant administrative hurdles could arise, due to retroactive effective dates.

1) FSAs


  • What would change?  The AHCA bill would repeal Flexible Spending Accounts (FSA) contribution limit. (AHCA Section 209)
  • What is the current law?  Current ACA law limits an individual’s total annual contributions to an FSA, to $2,500/year, indexed each year. The current limit is $2,600/year.
  • When?  If the AHCA passed, it would repeal the limit retroactively to taxable years beginning after Dec. 31, 2016.


2) OTC Meds


  • What would change? The AHCA bill would repeal the Over-the-Counter (OTC) Medication Tax imposed by ACA. (AHCA Section 207)
  • What is the current law?  OTCs are excluded from the definition of medical care and are only eligible for reimbursement under a Health FSA, HRA, or HSA with a doctors’ prescription
  • What else would change?  If AHCA passed, it would allow OTC medications to be reimbursed as medical care by an FSA, HRA (health reimbursement arrangement), or HSA (health savings account) without a prescription.
  • When? Would begin tax year 2017, and be in effect retroactively to Jan. 1, 2017.  


3) Cadillac Tax


  • What would change?  The AHCA bill would further delay the 40% excise Tax on Employee Health Insurance, also known as the “Cadillac Tax.” This would be a large relief to U.S. employers and businesses on both sides of party lines, as the Cadillac Tax as-is will disrupt employer-based health insurance significantly. (AHCA Section 206)
  • What is the current law?  The Cadillac Tax is not currently in effect, but is set to go into effect in the year 2020 unless it is repealed.
  • When?  Would postpone the Cadillac tax from going in to effect until the year 2026.


4) HSAs


  • Repeal HSA Tax Increase
    • What would change?  The AHCA bill would lower the percentage of tax applied to non-qualified distributions from an HSA (health savings account) to the pre-ACA tax rate. (AHCA Section 208)
    • What is the current law?  Using HSA dollars for anything besides qualified medical expenses must be included in an individual’s income; as well as subject to an additional 20% tax rate imposed by the ACA.
    • When?  Effective retroactively for all distributions occurring after Dec. 31, 2016 the tax rate would revert back to 10% for non-qualified distributions.


  • Increased HSA Contribution Limit
    • What would change?  The AHCA bill would increase the annual limit on HSA contributions. The new annual limit would be equal to the sum of the HDHP (high deductible health plan) deductible limit plus HDHP out-of-pocket expenses limit in any given year. This year, HSA contribution limits would be $6,550 for self-only coverage and $13,100 for family coverage. (AHCA Section 215)
    • What is the current law?  The current yearly maximum HSA contribution limits are $3,400 for self-only coverage and $6,750 for family coverage.
    • When?  Effective retroactively for all contributions made after Dec. 31, 2016


  • HSA Catch Up Contributions for Both Spouses
    • What would change?  The AHCA bill would allow both spouses to make HSA catch-up contributions to the same HSA account, if they are both over age 55. (AHCA Section 216)
    • What is the current law?  Currently, each spouse over age 55 needs to have their own HSA account to make their respective HSA catch-up contributions of $1,000.
    • When?  2018.


  • HSA Special Rule for Previously-Incurred Medical Expenses
    • What would change?  The AHCA bill would allow an individual to use HSA funds to pay for qualified medical expenses occurring before the HSA was established. Individuals would be allowed this rule if they were enrolled under an HDHP within the 60 day period prior to the HSA being established. (AHCA Section 217)
    • What is the current law?  Currently an individual may only use HSA funds tax free for expenses associated with the first day the HSA is established and onward.
    • When?  2018.

Access the full text of the AHCA on the House of Representatives web page.


As a long-time member of the Employers Council for Flexible Compensation (ECFC), Employee Benefits Corporation will continue to provide ACA Watch updates as legislation continues to evolve.

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