The 57-page American Health Care Act would dismantle some parts of the Affordable Care Act by eliminating the mandates, changing minimum coverage requirements and also reducing tax breaks.
While it is currently only a proposal and subject to change, here are some ways the new bill could impact mid-market organizations.
1. The mandates will end. Under the Affordable Care Act, any company with more than 50 full-time employees is required to offer suitable health insurance or face a fine of up to $3,390 per employee. The American Health Care Act would repeal both the individual and employer mandates, eliminating the requirement to offer or carry health insurance.
Karen Kerrigan, president and CEO of the Small Business & Entrepreneurship Council, said that many smaller organizations will be glad to see the penalties gone. Over the past few years, some smaller mid-market organizations had acknowledged it was less expensive to pay the penalties than to offer insurance to employees in some high-cost markets. “Repealing the mandates, including the employer mandate, and taxes in the ACA are measures we have supported for some time,” said Kerrigan.
In theory, many employers could stop offering health insurance. Yet offering health insurance is still a critical component of attracting talent for many mid-markets, and is the most important benefit for employees, according to a survey by the Society for Human Resources Management. Karen Wessels, researcher for workforce planning at SHRM said that many companies already offer enhanced benefits as a competitive advantage.
2. Minimum coverage requirements will change. The GOP bill does keep the ACA rules that insurers cannot drop sickly patients, and that children can remain on their parents’ policies until age 26. The first version of the bill didn’t address any of the 10 essential health benefits that all policies are required to cover under the Affordable Care Act. Yet most sources say it’s highly likely some of those benefits will be reduced. Thomas Barker, Christopher Feudo and Jonathan Keselenko, attorneys at the law firm of Foley Hoag LLP, said language in the bill makes the terms related to the 10 essential elements “no longer significant.” Regardless of how the plan was purchased or whether it contains those elements, the conversion of subsidies to refundable tax credits can be used for anything.
While it could result in reduced benefits for the insured, advocates say eliminating or reducing the 10 essential benefits could give consumers more choice to lower cost plans that fit their needs.
3. Employers could have fewer tax breaks. Under current law, premiums paid for employer-sponsored health insurance are excluded from a business’ taxable income. It is the largest tax break in the federal tax code, equating to nearly $250 billion per year. The GOP plan wants to cap the tax break.
Advocates of the tax break say capping it would cause employers to offer fewer benefits or end coverage. James Gelfand, senior vice president of policy for the ERISA Industry Committee, said it’s “not a policy that’s good for workers and not a policy that’s good for employers. Why would an employer want to pay for the health benefit if the government is willing to pay [with a tax credit?]” said Gelfand.
Yet economists largely support limiting the tax break. Martin Gaynor, economist at Carnegie Mellon University, said the “unlimited subsidy” gives consumers and businesses little reason to care about the cost of healthcare. This further increases spending and healthcare costs, which leads to higher insurance costs.
Kaiser Health News reports that the bill would not repeal, but only delay the “Cadillac tax” from 2020 to 2025. This tax would impose a 40% excise tax on employers’ plans that cost more than $10,200 for individuals and $27,500 for families.
4. It could make premiums rise, or fall. It’s a debatable, and very politicized, conversation on whether the GOP healthcare bill would reduce costs. Some experts believe that ending the individual mandate will entice more people to drop their coverage. In theory, that would mean fewer patients paying into the pools and result in higher rates for those who remain. Others say that shifting tax credits to consumers and reducing the essential benefits would help create more options and lower premiums.
Costs have already been on the rise for decades, and in some states, have risen since the implementation of the ACA. There also has been a continuing trend of employers shifting a higher portion of the costs to their employees. The 2016 Employer Health Benefits Survey by the Kaiser Family Foundation found that employers contributed an average of $5,306 for singles and $12,865 for family insurance premiums, representing a 58% premium increase since 2006. That compared to a 78% increase in premiums for employee contributions during that time.
Regardless of the impacts on insurance premiums, many argue the bill, like the ACA, does little to address the actual costs of healthcare. Congressional conservatives like Rand Paul have already expressed opposition to the bill, and said that it amounts to “Obamacare lite” and “doesn’t fix the primary problem” of rising costs.
“The one primary thing that’s wrong with Obamacare that’s visible to everybody is that premiums are rising through the roof, soaring in the individual market,” Paul said. “That will happen under the Ryan plan as well because they do nothing to fix the fundamental problem.”