OUR PERSPECTIVE


ACA INSIGHT: ALL SIGNS POINT TO A NEW REALITY

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It is clear that President Elect Trump and his transition staff want to make major changes to the Affordable Care Act in the short run and replace the Act in the long run. While much is unknown relative to the specifics of the new administration's final position, it is important that we keep you, our clients, informed relative to possible outcomes. Although much of what is outlined has not been decided, there is clear intent for major changes by the new administration. Everything being contemplated will be subject to the legislative process where even the Republicans are not united on a single way to change the plan.

As a guide for what may transpire, we have looked to proposals from President Elect Trump’s nominee for Secretary of Health and Human Services as well as the “A Better Way” proposal put forth by House Republicans in June of 2016. Below is a summary of the key objectives and goals of the new administration:

  • It is clear the new administration intends to eliminate individual mandates required under the current plan. Their position is that no person should be required to buy insurance unless he or she wants it. Having said that, the press reports on the political concerns of Congress not to eliminate coverage for over 20 million individuals.
  • In addition, the proposal offered by Tom Price (potential new head of HHS) outlines the following tax incentives for individuals in attempt to incent participation in the individual plans:
    • Provides for refundable, age adjusted tax credits with amounts tied to average insurance on individual market adjusted for inflation.
    • $1,200 for those between 18 to 35 years of age
    • $2,100 for those between 35 and 50 years of age
    • $3,000 for those who are 50 years and older
    • $900 per child up to age 18
  • Tax credits would be available to those who purchase health insurance through the individual market. Upon purchase, individuals would have the option of receiving an advanceable, refundable credit.
  • The new administration wants to modify the existing law prohibiting the sale of health insurance across state lines. As long as the plan purchased complies with state requirements, any vendor ought to be able to offer insurance in any state. By allowing full competition in this market, insurance costs will go down, consumer satisfaction will go up and the portability of individual policies will be enhanced.
  • The new administration wants to permit individuals to fully deduct health insurance premium payments from their tax returns. The thinking is that businesses are allowed to take these deductions so why wouldn’t Congress allow individuals the same exemptions? While corporate tax exemptions will in all probability remain in effect, we expect that those exemptions will have some new limitations. There is a proposed limitation on Employer-Provided Health Care Coverage allowing the employer exclusion of health care coverage up to $20,000 for a family and $8,000 for an individual, with any additional funds used to be taxable dollars be subject to formulaic limits not in effect today.
  • Health Savings Accounts (HSA’s) play a prominent role in the replacement discussion.Essentially, contributions into HSAs would be tax-free and would be allowed to accumulate tax free. In some proposals these accounts would become part of the estate of the individual and could be passed on to heirs without fear of any death tax penalty. These plans would be particularly attractive to young people who are healthy and can afford highdeductible insurance plans. These funds could be used by any member of a family without penalty. Incentives being considered are as follows:
    • A one-time $1,000 tax credit
    • Allowing HSA contributions to be equal to the maximum IRA contribution level
    • Allow for the transfer of the minimum distribution requirement from a retirement plan to an HSA prohibiting inclusion in an individual’s gross, taxable income
    • Protects HSA funds from seizure in bankruptcy proceedings
    • Allows spouses who are HSA account holders to double their catch-up contributions to account for their eligible spouses
  • Providers and physicians will be required to provide better price transparency to create more of a free market system through better informed consumers. In addition, the plan calls for limiting barriers to entry within the pharmaceutical industry with the goal of encouraging competition within a free market system. There is also a proposal limiting the liability for providers vis a vis lawsuit abuse reform.
  • There is an intention to review basic options for Medicaid and work with states to ensure that those who want healthcare coverage can both obtain and afford the coverage. Clearly, there is reliance on the state's knowledge of their population in terms of risk and need to properly set the agenda in this regard.
  • As already stated by President Elect Trump, we can expect to see a continuation of preexisting conditions and coverage continuing to age 26 under the new plan. There is a strong possibility that the "Cadillac Tax" will no longer be a requirement for 2018.
  • There is a proposal for an equal employer contribution rule to promote choice. This would allow the employer to make a pre-tax monetary contribution for employees to select his/her own plan, either a company sponsored plan or a plan available in the individual market.
  • The Small Business Health Fairness Act would permit small business owners to form “Association Health Plans” and band together across state lines for the purpose of purchasing health coverage. Additionally, it established solvency standards, actuarial certification and reserve requirements to protect members and their employees.
  • Amending HIPAA wellness regulations has also been proposed to increase permissible variation for programs of health promotion and disease prevention from 20% allowance to 50% of the cost of coverage, effective one year after date of enactment.
  • The administration is seeking transparency and insurance reform measures setting forth requirements for the reporting of claim information under certain group health plans; proposed penalties include:
    • 30 days after the date a health insurance issuer receives a request for a report of claim information from a plan, plan sponsor, or plan administrator, the health insurance issuer shall provide the requesting party the report.
    • The health insurance issuer is not required to provide a report to an employer or group health plan more than twice in any 12-month period.
    • The employer must have 50 or more employees.
    • The report must be a written report transmitted through an electronic file or available online to the requesting plan, plan sponsor, or plan administrator

While we expect the new President to take action quickly to repeal the Affordable Care Act, it will take some time for the legislative process to negotiate change and replace the law. It is also clear that the changes which need to be made within the operating model of healthcare carriers and other key stakeholders will require time to implement. We believe that many of the current plan requirements will be eliminated or not be enforced due to a lack of funding. In other words, the budget reconciliation process of the Republican dominated congress will make many of the current ACA funding requirements DOA by eliminating enforcement of the law. Nevertheless, we do not recommend any change in strategy with regard to current ACA requirements.

Our intent is to stay attentive to the possible changes and work strategically to begin to develop alternative strategies as proposals reveal themselves. We believe now more than ever it is important for our clients to begin to develop a strategic plan for benefits in anticipation of these changes. We believe that planning ahead will help to mitigate liability and reduce costs.

Mike Malouf
Managing Partner

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