As I write this, the 13 members of the 115th Congress of the United States are secretly discussing the future of American health care. They are poised to reveal their revisions to the American Health Care Act (ACHA) that was passed by the House just last month.
Republicans promised to dismantle the ACA if they were elected into power, and they were. Here is a look at what has happened with the Affordable Care Act (ACA) since Inauguration Day, 2017.
From the Beginning: Repeal and Replace
The Executive Order (EO) signed by President Trump on January 20, 2017, authorized the Secretary of the Department of Health and Human Services and other executive departments to grant waivers of any penalties the ACA imposed on individuals, insurers, and purchasers of health insurance.
Soon thereafter, the IRS stated on their website that they would not reject individual tax returns that do not indicate whether the individual is enrolled in the minimum essential health coverage.
The EO also allows for the sale of insurance across state lines, potentially helping
those rural areas where major insurance carriers have opted out of the exchange. This has potentially given people more options for purchasing coverage.
The Freeze Order that was issued for 60 days as part of the EO postponed regulations issued but not yet effective, withdrew regulations in the pipeline but not published, and directed no new regulations be sent to the Federal Register for publication. However, the 60-day window closed with no new regulations proposed.
Pulling Advertising Dollars
The Trump Administration pulled all remaining monies budgeted for promoting open enrollment, which began on November 1, 2016. While the Administration claimed that they would not “throw millions of dollars into promoting a failed program,” insurance providers are leaving the program at an increased rate, which is exacerbating the ACA’s instability.
As HHS Secretary Tom Price observed: “If a house is on fire, you do not wait for it to burn to the ground before trying to save the family trapped inside.” However, the question still begs to ask: “how do we save the family when the fire department is on strike?”
HHS Final Rule
Aiming to stabilize the insurance marketplace, the U.S. Department of Human and Health Services issued a final rule on the Patient Protection and Affordable Care Act (PPACA) in April. The key changes made were in response to insurers requests, which include shortening the annual open enrollment period, amending the special enrollment period rules, and restricting guaranteed availability for individuals with outstanding premium bills.
Enter the AHCA
The AHCA is possibly more unpopular than the ACA according to polls, but what exactly changes with it in comparison to the ACA? In summary:
- All mandated and pay-or-play penalties are to be repealed.
- The threshold for tax-deduction of unreimbursed medical expenses is to be reduced to 5.8% of AGI. It is currently 10%.
- The 3.8% tax on net investment income is to be repealed.
- The .09% additional Medicare tax on high income individuals is to be repealed.
- The limitation on tax-deductible retiree drug expenses that are reimbursed through the federal retiree drug subsidy program is to be repealed.
- The small employer health insurance tax credit is to be repealed.
- Replace the income-adjusted premium tax credits with age-adjusted tax credit. This tax credit would be unavailable if there is eligibility for employer health coverage or government health coverage.
- Simplify reporting using the Form W-2 instead of the 1095 forms.
- Remove the limitation on employee contributions to medical flexible spending accounts.
- Allow over-the-counter drugs to be reimbursed tax-free under an FSA or HSA.
- Reduce the additional tax on “unqualified” distribution from HSAs to 10%. It is currently 20%.
- Increase HSA contribution limits to more closely match the maximum high deductibles in certain health plans: 6,550 for individuals and 13,100 for families.
- Both older spouses can make age 55 catch-up contributions to the same HSA.
- Uninsured health expenses that are incurred within 60 days of establishing an HSA can be reimbursed tax free.
- The Cadillac tax is to be delayed until 2026.
- The current Medicaid funding formula based on a federal match will be replaced with a per-cap or block-grant formula.
- Impose a one-year 30% premium penalty for failing to maintain continuous coverage (beginning in 2019). A break in coverage of more than 63 days triggers the penalty.
- Increase the ratio of premiums charged to older individuals compared with younger individuals from 3:1 to 5:1.
- Create state high-risk pools.
These changes have brought about mixed reviews. The good news is that the AHCA continues to protect against excluding pre-existing conditions. On the other hand, that may not matter because premiums will become too expensive, particularly for older subscribers. Add in the 30% penalty for lapse in coverage and many will go without health care based on that alone.
Furthermore, increasing premiums for older individuals could mean someone having to choose between paying their health insurance premium and other necessary expenses if on a fixed income. For others yet, the age-adjusted tax credit shifts most positive aspects of coverage from older people who need health care to younger people who don’t need as much.
For families and individuals who are able to save the maximum in an HSA or FSA, they will benefit from being able to offset some of the costs of their healthcare. Plus, the 60-day window still allows people to enroll in a plan and get reimbursed if they are uninsured for less than 60 days.
It’s Not Over Until It’s Over
The Senate Majority Leader, Mitch McConnell is hoping to have a bill ready for the Senate to pass and President Trump to sign into law before the 4th of July break. It looks like we won’t know what their changes to the ACHA won’t be revealed to the public before the vote. Even once the vote is in, it may not be over.