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House Passes the American Health Care Act: What’s in the Bill and What Happens Next?

The U.S. House of Representatives narrowly passed the American Health Care Act (“AHCA”) on Thursday, May 4 by a 217-213 vote. The bill, which has been amended several times since initially introduced by House Republicans in March, is intended to repeal and replace key portions of the Affordable Care Act (“ACA”).

The final House bill combines the original AHCA proposal with the subsequent amendments. Among other things, the final House bill would:

  • Reduce the ACA’s individual and employer shared responsibility penalties to $0 effective retroactively to 2016;
  • Repeal the ACA’s Marketplace cost-sharing reduction payments;
  • Create a $138 billion Patient and State Stability Fund for states to use for reinsurance and other purposes;
  • Change the ACA’s Marketplace premium tax credits to allow them to be used off-Marketplace and, after 2020, replace them with new fixed-dollar, age-based tax credits for those who purchase individual health insurance;
  • Impose a 30% premium surcharge for up to 12 months on enrollees who fail to maintain continuous health coverage for more than 63 days;
  • Liberalize existing rules for HSA’s;
  • Delay the “Cadillac tax&rdquo on high cost health coverage to 2026;
  • Repeal the ACA’s prohibition on reimbursing over-the-counter medications from HSA’s, FSA’s, and HRA’s;
  • Repeal the ACA’s $2,500 annual limit on FSA contributions;
  • Repeal the ACA&rsuqo;s increase on the medical expense income tax deduction; and
  • Repeal various ACA taxes, including the unearned income tax and additional Medicare tax for high wage earners, the branded prescription drug tax, the health insurance provider tax, the medical device excise tax, and the so-called tanning tax.

The AHCA, as passed by the House, would not change any of the following:

  • The income tax exclusion for employer-provided health benefits;
  • The ACA reporting requirements (IRS Forms 1094/1095). However, beginning in 2020, employers would report offers of coverage on Form W-2, so the IRS could stop enforcing the existing reporting requirements; and
  • Many of the ACA’s insurance market reforms, including the guaranteed availability and guaranteed renewability requirements, the requirement to offer dependent coverage to age 26, annual out-of-pocket maximums, and the prohibition on annual and lifetime limits.

Next Steps

The bill now moves on to the Senate, where its future is far from certain. Senate Republicans can only afford to lose two Republican votes in order to pass the legislation and several Senate Republicans have been critical of certain aspects of the bill. Further, because the AHCA is a reconciliation bill, only measures that have significant impact on the federal budget will be able to pass without any Democratic support, per the Senate’s parliamentary rules. Some have questioned whether all of the provisions in the House bill have the required fiscal impact to pass the Senate by reconciliation.

If the Senate ultimately passes a different version of the bill, which appears more than likely at this point, the bill will then go to a conference committee where the two chambers will attempt to negotiate a final bill.

Clearly, the AHCA still has a long way to go before it becomes law. We will continue to monitor the bill as it moves through the Senate and will alert you of developments as they occur.


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