After years of thwarted efforts, congressional Republicans took the first step toward repealing and replacing the Affordable Care Act (ACA). Earlier this month, the House of Representatives passed The American Health Care Act (AHCA), which eliminates or modifies key tenets of the ACA and promises to reshape the way employers provide health insurance.
YinYang / iStock / Getty Images Plus
While lobbying from groups like the Society for Human Resource Management (SHRM) preserved the preferred tax treatment of employer-sponsored plans, there are other provisions in the AHCA that could change the way businesses think about benefits. In fact, the bill could hasten changes that are already leading many businesses away from group health insurance.
For Human Resources (HR) professionals, many of these changes are significant.
What Does The AHCA Say About Employer-Sponsored Coverage?
The AHCA has yet to be considered in the Senate, where members of both parties are pushing for major alterations to the bill. However, as it stands, the AHCA makes several changes to the ACA that would affect HR professionals and the business owners and employees they advise.
The most impactful change in the AHCA is the repeal of the employer and individual mandates. If this bill becomes law, businesses with more than 50 employees would no longer be required to offer health insurance to full-time staff.
Similarly, individuals would no longer need to have minimum essential coverage to avoid an IRS penalty. Instead, the AHCA institutes a 1-year, 30% premium penalty for individuals who seek coverage after going 63 days or more without insurance.
The AHCA also delays the 40% “Cadillac tax” on high-cost employer-sponsored health plans.
Additionally, the AHCA would eliminate—in 2020—the small business tax credit granted under the ACA. At the same time, the AHCA would greatly expand tax credits to individuals. Where the ACA granted income-based premium tax credits and cost-sharing subsidies, the AHCA would instead provide an age-based tax credit for which many more Americans would qualify.
Finally, the AHCA allows states to request waivers that would allow them to set their own essential health benefit requirements and permit insurers to charge more based on age and health status. If states do request these waivers, it could lead to different standards of coverage across the country.
How Will the AHCA Affect the Take-Up Rate for Group Health Insurance?
While the Congressional Budget Office (CBO) hasn’t released its assessment on the likely effects of the AHCA, it did issue its opinion on the first version of the bill in March. According to that report, the repeal of the employer mandate—coupled with the new tax credit—would lead to dramatically fewer Americans being covered by employer-sponsored health insurance.
Specifically, 2 million fewer Americans are expected to have employer-based coverage by 2020. In 2027, that number will likely increase to 7 million.
What’s more, state waiver requests could affect how much businesses pay for coverage, as well as the extent to which employees are covered for certain health conditions.
What’s Happening Outside of Health Care Reform?
Beyond the AHCA, other trends are percolating that promise to expedite the transition away from group health insurance.
While the vast majority of employees still expect their company to play some role in financing their health care, 75% say they prefer benefits they can customize to meet their needs—rather than accept a one-size-fits-all policy from their employer.
Dissatisfaction with current employer plans is particularly strong among small businesses, where an Aflac survey finds that just 33% of employees say they’re “satisfied” with their benefits.
Together, these changes in federal law and employee preference are expected to erode the importance of traditional group policies in the workplace.
What Will Employers Do Instead?
While businesses of all sizes may be tempted to drop formal group health insurance, it’s unlikely they’ll offer nothing to their employees. Nearly 90% of employees say health insurance is a “must-have benefit,” and a significant portion say they would consider leaving their company if they were offered better benefits elsewhere.
Instead, HR professionals will need to turn to alternative benefit plans if they want to satisfy both employee preferences and the need to cut back on the time and money associated with group health insurance.
Several alternatives are already gaining traction in the marketplace, and if the AHCA becomes law, they’ll become still more popular.
The AHCA affirms the Qualified Small Employer Health Reimbursement Arrangement (QSEHRA), also known as the Small Business HRA, a health reimbursement plan established by Congress in December 2016.
The QSEHRA allows small businesses to reimburse their employees for individual policy premiums and other medical expenses. Through the arrangement, businesses with fewer than 50 full-time employees set a monthly allowance for employees. Employees then choose an individual insurance policy on or off the exchange, and submit premium expenses—along with other out-of-pocket costs—for reimbursement. The QSEHRA administrator approves the expenses, and money is disbursed.
In addition to reinforcing the QSEHRA, the AHCA also simplifies how tax credits interact with the arrangement, making administration of the benefit easier for employees and HR professionals.
Health savings accounts (HSAs) also get a boost from the AHCA. The proposed legislation enhances the value of HSAs, making them a more attractive option for both individuals and businesses looking to offer a benefit.
The bill increases the maximum contribution limits for 2017 to $3,400 for self-only coverage and $6,750 for family coverage. In 2018, contribution limits would rise to at least $6,550 and $13,100, respectively. Two spouses could also make catch-up contributions to the same account under the AHCA, and the timeline for HSA-eligible expenses would expand to include the day the accompanying high-deductible health plan (HDHP) goes into effect.
With these provisions, it’s likely more HR professionals will look into an HSA-qualified HDHP or integrating an HSA with a QSEHRA. Both approaches allow HR professionals to respond to changing employee desires while allowing their businesses to remain competitive employers.
How HR Professionals Can Succeed Under the AHCA
Health benefits are a key piece to attracting and retaining talented employees. As employee preferences and legislative changes alter the benefits landscape, however, it’s necessary to adapt. HR professionals should be prepared for these changes and comfortable administering a variety of nontraditional programs.
In businesses tempted to drop group health insurance, HR professionals can be a crucial part of the conversation. By communicating the continued value of employee benefits and putting forward options like the QSEHRA and HSAs, HR professionals can help their businesses acclimate to a post-AHCA environment.
And as employees place an increasingly higher value on simple, customizable benefits, these alternative plans will continue to be worthwhile considerations—whether the bill passes or not.
|
|
Caitlin Bronson is the content writer for Zane Benefits, an employee benefits solution for small businesses. A professional communicator in the insurance space, Bronson has worked with small businesses, employment agencies, and financial advisors to navigate healthcare reform and other policy changes.