May 2017 | Vol. I, Issue 6 | Center for Health

This periodic e-newsletter is provided to keep conference benefits officers and other United Methodist Church (UMC) employer representatives informed about the Affordable Care Act (ACA) and evolving health care landscape—and the impact on you as an employer/plan sponsor. Please share this Health Care Reform Update with church administrators and others in your annual conference or organization. Contact Wespath Benefits and Investments at healthcare_reformupdate@wespath.org with article ideas or if you would like to share your organization’s experience in a future issue. LEGISLATIVE UPDATE House Passes American Health Care Act On May 4, 2017 the U.S. House of Representatives passed a bill called the American Health Care Act (AHCA). If passed by the Senate and signed by the President, the bill would become law. More likely, however, the Senate will have changes, and a joint conference committee will work to iron out differences, after which each house of Congress would vote again on the bill produced by the committee. Summary of the Act The AHCA would have a significant impact on three aspects of the Affordable Care Act (ACA), the health care reform law from 2010: the expansion of Medicaid; the public Exchanges (“Health Insurance Marketplace”), including the tax subsidies for consumers in the Exchanges; and the sale of individual health coverage policies outside of the Exchanges. The AHCA would have relatively minor direct effects on employer-sponsored coverage in the near term. Impact on Medicaid The AHCA would repeal the ACA’s expansion of Medicaid, effective December 31, 2019. People who have enrolled while Medicaid was expanded can remain covered with the federal government funding to the states allowed through the Medicaid expansion. But if these individuals have a break in eligibility for more than one month, they will no longer qualify for the federal funding allowed by the ACA Medicaid expansion, and therefore may not be able to get back into the Medicaid program if the states do not choose to provide expansion funding on their own (not likely). The Congressional Budget Office (CBO) estimates that this provision will lead to 14 million fewer individuals covered by Medicaid by 2026, saving the federal government about $880 billion over the 10-year budget window. Impact on Public Exchanges The AHCA would repeal the tax credits currently provided on the public Exchanges for those between 100% and 400% of the federal poverty level (FPL), effective January 1, 2020. The AHCA would also repeal the ACA provision requiring insurers on the Exchanges to reduce the cost-sharing normally required under their policies (i.e., the amount of deductibles, copayments and coinsurance an insured person must pay). This change would apply to individuals at 100% to 250% of FPL. The AHCA would provide new tax credits for those without employer or governmental coverage, but the new credits will be based on age, not income. The new tax credits will be the same for all individuals in an age bracket, and are phased out for individuals with income above $75,000 (and joint returns with income above $150,000). Specifically, a tax credit (refundable and advanceable) for the purchase of health insurance will be provided, up to the following (annual) amounts, for: Individuals under 30: $2,000 Individuals 30 and older, but not yet 40: $2,500 Individuals 40 and older, but not yet 50: $3,000 Individuals 50 and older, but not yet 60: $3,500 Individuals 60 and older: $4,000 The Secretary of Health and Human Services (HHS) is directed to establish a program to arrange for payment of these credit amounts to providers of health insurance, beginning January 1, 2020. The credits would be available for policies purchased either through the Exchanges or outside the Exchanges. Impact on Sale of Individual Health Coverage Policies Outside the Exchanges Under the ACA, the sale of individual policies outside the Exchanges has been subject to the same basic rules requiring coverage of “essential health benefits”that applied to policies sold on the Exchanges. The AHCA would allow waivers to permit states to decide what benefits are “essential.”(Currently, the ACA and its implementing regulations define what benefits are “essential”nationwide.) States would also be allowed to apply for waivers of 1) the ACA rule prohibiting charging a person more for a policy on account of a pre-existing health condition, and 2) the ACA rule limiting how much more an older person could be charged for a premium. A new Patient and State Stability Fund would be created—a pool of federal money to be divided among states—which the states could use to reduce the cost of insurance for individuals whose policies will cost them more after the AHCA takes effect. Funds are also earmarked for reimbursing certain insurers part of the cost of high-cost health conditions of individuals who qualify under standards to be established by the Centers for Medicare and Medicaid Services. Other Changes 1. Repeal, Reduction or Delay of Various Taxes a. Individual Mandate Tax The tax on individuals who fail to obtain minimum essential coverage would be repealed under the AHCA, effective (retroactively) for months after December 2015. While this may reduce the incentive for healthy individuals to buy coverage, the bill includes a new but different penalty, to be imposed by insurance companies on individuals who fail to maintain continuous coverage. If a person goes 63 days or more without coverage, the insurance company is required to charge them a premium 30% higher than they would otherwise pay, for a limited period of time (generally 12 months). b. Employer Mandate Tax An applicable large employer [i.e., those with at least 50 full-time or full-time equivalent employees (FTEEs)] would no longer be liable for a penalty for failing to offer coverage to full-time employees. (Reporting of offers of coverage is still required, however. See Impact on Employers below.) c. Cadillac Plan Tax The Cadillac Plan Tax is the ACA tax on the providers of “high-cost”coverage (an excise tax of 40% of the cost of coverage over a certain amount), which had been delayed previously to taxable periods beginning in 2020. The AHCA would delay the tax again, to taxable periods beginning in 2026. d. Other Taxes Some of the other taxes created by the ACA that would be reduced or eliminated by the AHCA include the Medicare tax increase for high-income individuals, the additional net investment income tax, and a tax imposed on manufacturers of medical devices. 2. Impact on Employers Applicable large employers (ALEs) will no longer face a tax for failing to offer coverage to their employees. However, ALEs are still required to file reports on whether they offer coverage, as they did under the original ACA (Forms 1094-C and 1095-C). The failure to file these reports is subject to a general penalty for failing to file required reports with the IRS, and this general penalty has not been changed by the AHCA. Employers that do continue to sponsor health plans will see some changes. As mentioned above, the Cadillac Tax is delayed again, until 2026. There will be a new reporting requirement (tied to the new tax credits) for Forms W-2, effective in 2020. Some technical changes are also allowed, which apply more directly to health plans. If the bill continues to include these technical changes in any version that passes the Senate, Wespath will detail these in a later publication. Impact on UMC Since most annual conferences in the United States sponsor a health plan for clergy, the near-term impact on health coverage for clergy will be limited to conferences that have terminated sponsorship of group health plans. To the extent that clergy in such conferences are relying upon the ability to purchase coverage on the individual market, either on the ACA Exchanges or the private insurance market in their state, they may find the cost and robustness of individual coverage different under the AHCA. These individuals would have access to the new AHCA tax credits described above, but there will no longer be a statutory assurance that those between 100% and 400% of the federal poverty line will be able to purchase a policy for less than a certain percentage of their income. In some cases, policies may be less expensive (e.g., for young people with no health problems); in other cases, policies may be more expensive (e.g., for older individuals, or those with pre-existing health conditions in states that request a waiver). The AHCA provides a certain amount of money each year, which may be used to reduce the cost of policies for the latter individuals. The impact of these potential funds is not yet clear. As noted below, the CBO has not yet issued a report estimating the budgetary impact of the revised AHCA (i.e., the May 4 version passed by the House). Next Steps The next step is for the AHCA bill to be considered by the Senate, as noted above. The CBO may issue a report prior to the Senate taking up the bill. (The CBO’s prior report is of limited assistance with respect to the bill just passed, since it was issued prior to several amendments of the AHCA in April and May.) The AHCA would not become law unless and until both houses of Congress approve it and it is signed by the President. Wespath continues to monitor activity regarding health care legislation, and will provide analysis and updates as more information becomes available. Return to Top Disclaimer: This e-newsletter is provided by Wespath Benefits and Investments as a general informational and educational service to its plan sponsors, the annual conferences, plan participants and friends across The United Methodist Church. It should not be construed as, and does not constitute, legal advice nor accounting, tax, or other professional advice or services on any specific matter; nor do these messages create an attorney-client relationship. Readers should consult with their counsel or other professional adviser before acting on any information contained in this newsletter. Wespath expressly disclaims all liability in respect to actions taken or not taken based on the contents of this newsletter. Copyright © Wespath Benefits and Investments, a general agency of The United Methodist Church Share your suggestions and comments about Health Care Reform Update