Benefits and Compensation

Defeat of ACA Repeal: The Aftermath for Employers

The apparent demise of a full-scale Affordable Care Act (ACA) repeal may be followed by more incremental efforts to tweak ACA requirements. For now, however, the lack of dramatic changes means that some employers may need to refocus on the reporting and other requirements of the law.ACA

The July 28 defeat of the so-called “skinny” ACA repeal by a 51-49 vote in the Senate seemed to end Republicans’ hopes, for now, to enact ACA “repeal and replace” legislation.

“While the statutory framework of the ACA remains intact, there are several developments that may occur in Congress, on the regulatory front, and in the courts that warrant employers’ attention,” observed Susan Nash, an attorney with Winston & Strawn LLP. “However, until these developments play out, it is business as usual, albeit with heightened attention, for employers.”

The failure of an ACA repeal means the employer and individual mandates remain intact for now, Nash noted. The Internal Revenue Service (IRS) has relaxed enforcement of the individual mandate but, so far, not the employer mandate. “Although the IRS has acknowledged glitches in the reporting system,” she said, “the IRS has confirmed that an applicable large employer is still subject to an employer shared responsibility payment” (ESRP) under the circumstances set forth in the ACA rules.

Therefore, “[L]arge employers should continue to offer minimum essential coverage to their full-time employees in order to avoid a penalty, and to track offers of coverage in order to comply with reporting requirements on Forms 1094 and 1095,” Nash said. “The IRS has been sending rejection notices and inquiries to employers regarding 2015 and 2016 Form 1094 and 1095 filings,” over issues such as incorrect taxpayer or employer ID numbers, as well as outright failure to file.

Possible Relief

Despite the failure of full repeal, “[E]mployers are hoping Congress can still pass narrowly tailored relief in the form of stand-alone legislation or by including reforms in a bipartisan bill to stabilize the insurance markets,” Nash added. On the administrative front, the agencies implementing the ACA could issue regulatory guidance that responds to the Executive Order President Trump issued in January to reduce the act’s compliance burdens.

Areas where relief is possible, Nash said, include:

  • Increasing the size threshold for employers subject to shared responsibility payments;
  • Increasing the number of hours for determining who is a full-time employee;
  • Simplifying the methodology for counting hours; or
  • Changing the rules that apply to seasonal employees and interns.

In the area of heath savings accounts (HSAs), there could be “HSA-friendly” administrative changes “[S]uch as to clarify that certain chronic care services are within the scope of preventive care, thus allowing the plan to pay for such services before the deductible is met,” noted Carolyn Smith, an attorney with Alston & Bird LLP. “Other HSA changes, such as increasing the contribution limits, would require a legislative change.”

The IRS also could streamline reporting requirements or change some reporting deadlines, as they have in the past, but there are, as yet, few specifics on administrative relief, Smith added. “Employers were anticipating that current law reporting requirements would be simplified if the individual and employer mandates were repealed; at this point however, employers need to plan in the absence of repeal.”

The U.S. Department of Health and Human Services recently solicited input on possible administrative steps to ease the ACA burdens, and plan sponsor groups responded with numerous recommendations.

Meanwhile, however, the IRS has dismissed suggestions that the Executive Order negated employers’ obligations to comply with the mandate or face ESRPs. “The Executive Order does not change the law; the legislative provisions of the ACA are still in force until changed by the Congress, and taxpayers remain required to follow the law and pay what they may owe,” an IRS attorney stated in an information letter to Rep. Bill Huizenga (R-MI). “There is no provision in the statute that provides for the waiver of an ESRP.”

The ACA’s health insurance reforms would have remained in effect even if the House or Senate bills had been enacted, observed Alston & Bird’s Ashley Gillihan. “Those reforms could not be part of these efforts since the Republicans were attempting to effect change through a reconciliation bill, which is limited to budget/revenue items,” he explained.  Because they do not relate to budget or revenue, rules such as these would have continued unaffected:

  • The prohibition against annual or lifetime dollar limits on essential health benefits;
  • Summaries of benefits and coverage (SBCs), including the new SBC template for enrollments after April 2017;
  • 100% coverage of preventive care services;
  • The requirement to cover children to age 26; and
  • No preexisting condition exclusions/limitations.

The ESRP would have been reduced to zero, allowing employers to change some terms of eligibility without risking an excise tax, Gillihan added. “The existing reporting requirements would have changed some but not a lot.”

Bipartisan Hearings Scheduled

Hearings on potential bipartisan fixes to the health insurance market were scheduled for September by the Senate Committee on Health, Education, Labor, and Pensions (HELP).

“There are a number of issues with the American health care system, but if your house is on fire, you want to put out the fire, and the fire in this case is the individual health insurance market. Both Republicans and Democrats agree on this,” said Sen. Lamar Alexander, R-TN, HELP Committee chairman, in an August 1 statement.

Unless Congress acts before the September 27 deadline for insurers to contract with the ACA exchanges, “[M]illions of Americans with government subsidies in up to half our states may find themselves with zero options for buying health insurance on the exchanges in 2018,” and many others will face unaffordable premiums, copays, and deductibles, Alexander said. “Just as important, unless we act, costs could rise once again—even making health care unaffordable—for the additional 9 million Americans in the individual market who receive no government support.”

Alexander also called on the Trump administration to continue the cost-sharing reduction payments, which have been the subject of recent litigation and mixed signals from the executive branch. “Without payment of these cost-sharing reductions, Americans will be hurt,” he said. “In my opinion, any solution that Congress passes for a 2018 stabilization package would need to be small, bipartisan and balanced. It should include funding for the cost-sharing reductions, but it also should include greater flexibility for states in approving health insurance policies.”

Sen. Patty Murray, D-WA, the HELP Committee’s ranking Democrat, said in a July 31 statement she is “committed to working with Democrats and Republicans on bipartisan solutions to make health care more affordable, accessible, and higher quality.”

David Slaughter David A. Slaughter, JD, is a Senior Legal Editor for BLR’s Thompson HR products, focusing on benefits compliance. Before coming to BLR, he served as editor of Thompson Information Services’ (TIS) HIPAA guides, along with other writing and editing duties related to TIS’ HR/benefits offerings. Mr. Slaughter received his law degree from the University of Virginia and his B.A. from Dartmouth College. He is an associate member of the Virginia State Bar.

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