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Health Care Reform: Mandate Repeal, ACA Updates, Contraceptives
Asking "What If?" About a Repeal of the Employer Mandate
Among the many notable provisions of the Tax Cuts and Jobs Act passed late last year was the repeal of the Affordable Care Act's (ACA's) individual mandate. In fact, one could even say this news got lost in the shuffle of the slashed corporate tax rates and the changes to individual deductions.
But the fact remains that taxpayers will no longer be subject to a penalty if they aren't covered by a qualifying health plan, effective for months beginning after December 31, 2018. So could the employer mandate be next to go?
Indeed, legislation has been proposed to eliminate penalties for applicable large employers that don't comply with the ACA's "play or pay" rules. One industry group pushing for repeal is the American Benefits Council (ABC). The President of the ABC, James Klein, believes the individual and employer mandates are "inextricably linked," and to repeal one without the other is "inequitable."
Those in favor of doing away with both point to two adverse scenarios that employers may eventually face because of the individual mandate's repeal:
1. Rising absenteeism and declining productivity. Employees covered by employer health plans may opt to drop coverage to avoid paying their share of premiums. As a result, they may then avoid seeking medical care when they need it because of the high cost of services without the buffer of health benefits. Ultimately, employees may suffer more serious illnesses, missing many days of work and severely limiting their productivity.
2. Skyrocketing health care costs. Individuals not covered by employer plans will no longer have to buy coverage in the individual marketplace or face a penalty. Like workers who drop employer coverage, these people generally won't seek medical care when they need it and, instead, will present themselves to emergency rooms when their conditions become acute. Many of these patients won't pay their bills, ultimately passing on the cost of hospitals' uncompensated care to others.
In the political sphere, the Utah Republican chairman of the Senate Finance Committee, Orrin Hatch, has characterized the employer mandate as among "the most egregious aspects of [the ACA]." His U.S. House of Representatives counterpart, Ways and Means Committee Chairman Kevin Brady of Texas, believes eliminating the employer mandate (along with other changes) "would help treat some of [the ACA's] symptoms, [such as] rising premiums, fewer choices, uncertainty and instability."
Opposition to the employer mandate, however, may not be sufficient to make its repeal a reality — at least not very soon. This is because of not only political opposition by ACA supporters, but also the fact that a repeal would increase federal expenditures to fund tax subsidies to individuals who would buy care via Health Insurance Marketplaces (commonly known as "exchanges") when their employers stopped offering health benefits.
Questions to Ponder
Even with a repeal unlikely now, the mere possibility warrants serious consideration by employers of how to respond should it become a reality. Here are some questions to ponder:
If we were to drop coverage completely, how would doing so affect our ability to attract and retain employees, both in general and regarding those within particular demographics?
How likely is it that our competitors would drop coverage?
If we stopped offering coverage altogether, would employees still be able to affordably secure coverage through a Health Insurance Marketplace (assuming they still exist)?
If we were to drop coverage, would we want to share a portion of the resulting savings with employees to blunt their increased financial burdens of buying insurance on their own?
If we take that approach, should we use a vehicle such as a Health Savings Account to maximize the tax efficiency of such contributions, or simply increase base compensation?
Should we continue to offer health care benefits, but shift to a plan design that's less robust than that required by the ACA?
If we were to go that route, how specifically would we modify our coverage?
If we drop or reduce health care coverage, could or should we create a different kind of low-cost alternative benefit, such as subsidized employee access to specified urgent care centers?
Should we consider offering, instead, a limited benefit fixed indemnity insurance plan? (These plans pay out a specified amount of money directly to employees to pay for particular medical services.)
In addition to asking themselves these questions, employers would need to think about how they would communicate any changes to employees. A reduction or elimination of health care benefits would, more than likely, put a dark cloud over your organization, so you would need to clearly convey any silver linings.
For example, employees need to know that the cost of providing health care benefits has become an overwhelming burden that severely inhibits your ability to invest in new products or services, implement quality improvements, and maintain a competitive pricing strategy. Workers must understand that their job security may be threatened under these conditions.
Timing of Changes
Yet another area to consider is the timing of changes. If health care benefits were to be substantially reduced or eliminated, many employees might need several weeks or longer to adjust accordingly.
Finally, if the employer mandate is eliminated, employees will probably learn about it in advance and want to know how you intend to respond. Suppose you decide that, if given the opportunity to drop health care coverage, you wouldn't change anything immediately. In this situation, it would be important to strike a balance between reassuring employees that they won't be losing their benefits and letting them know you reserve the right to change your mind down the road.
Gauging the probability of a repeal of the employer mandate, or any other major legislative change, is exceedingly difficult. Still, there's no harm in mulling the possibility and brainstorming some ways you might react by asking, "What if …?"
Cadillac Tax Delayed, Health Insurer Fee SuspendedIn January, Congress passed and the President signed continuing appropriations legislation that includes two important provisions relating to the Affordable Care Act:1. The Cadillac tax. The effective date of the excise tax on high-cost employer-sponsored health coverage, commonly known as the Cadillac tax, has been delayed until 2022 (in other words, tax years beginning after December 31, 2021). Originally set to take effect in 2018, the Cadillac tax had previously been delayed until 2020.2. The health insurer fee. This annual fee is payable by insurers based on their proportionate share of the aggregate fee for the year as set by statute. (The share is based on the insurer's net premiums written for U.S. health risks for the previous calendar year.) The fee took effect in 2014 but won't apply in calendar year 2019. It had similarly been suspended for calendar year 2017 but applies for calendar year 2018. After the 2019 suspension, barring further legislative action, the fee will apply again for the 2020 calendar year.The legislation's focus was on temporarily continuing to fund government operations, but it also reauthorized the Children's Health Insurance Program (CHIP) for six years. The additional delay in the implementation of the Cadillac tax will be welcome news for employers struggling to determine the potential impact of the tax on their plans. The IRS will also have more time to resolve administrative issues surrounding the tax.Employers will also favorably view the one-year suspension of the health insurer fee (which is treated as an excise tax). Although the fee isn't directly assessed against employer plan sponsors, it will likely affect premiums paid by employers that sponsor insured plans. Efforts to change or perhaps repeal both taxes are likely to continue.IRS Releases 2017 Form for Claiming Small Business Health Care CreditThe IRS has released the 2017 version of Form 8941, which is used to calculate the health care tax credit of an eligible small employer. The small business health care tax credit generally is available to employers that:• Have fewer than 25 employees,• Pay average annual wages of less than $50,000 (indexed for inflation), and• Contribute a uniform percentage of at least 50% of the premium costs for employee health insurance coverage obtained through a Small Business Health Options Program (SHOP).The maximum tax credit is generally 50% of employer-paid premiums (35% for tax-exempt eligible small employers) and is available for only two tax years — which must be consecutive. Once calculated, the tax credit is claimed as a general business credit on Form 3800 (or, by tax-exempt small employers, as a refundable credit on Form 990-T).
May Our Plan Impose Cost-Sharing on FDA-Approved Contraceptives?
Question: Our company sponsors a nongrandfathered self-insured group health plan, and we're subject to the Affordable Care Act's (ACA's) preventive services mandate. Can our plan impose cost-sharing on some methods of contraception for women if we provide first-dollar coverage for other methods?
Answer: Your plan must provide women access to the full range of contraceptive methods identified by the Food and Drug Administration (FDA), as prescribed by a health care provider.
Under the ACA, nongrandfathered health plans need to provide coverage for certain preventive services without cost-sharing when delivered by in-network providers. Preventive services for women include coverage for a broad array of items and services, including contraceptives.
Exemptions and accommodations are provided for certain religious employers and others with sincerely held religious beliefs or sincerely held moral convictions if they meet specified requirements. (There have been ongoing court challenges to the scope and nature of the exemptions and accommodations.)
For plans subject to the contraceptive coverage mandate, the full range of FDA-approved contraceptive methods includes, but isn't limited to:
Several different barrier methods (for example, diaphragms and sponges),
Hormonal methods (for instance, oral contraceptives and contraceptive patches), and
Implanted device methods (for example, intrauterine devices).
Any method must be prescribed by a health care provider.
At Least One
Employers need to provide coverage without cost-sharing for at least one form of contraception within each method identified by the FDA. For example, because the FDA identifies diaphragms and sponges as separate methods, at least one contraceptive product within each method must be covered without cost-sharing.
Note that, if multiple services and FDA-approved items within a contraceptive method are medically appropriate for an individual, the plan is permitted to use reasonable medical management techniques to determine which specific products to cover without cost-sharing with respect to that individual. But if the individual's attending provider recommends a service or FDA-approved item based on a determination of medical necessity, the plan must cover that service or item without cost-sharing.
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