The Republican Party has sought the end of the Affordable Care Act since before its inception, and now that Barack Obama is reaching the end of his final term, the GOP hopes to make its move.
In addition to a plan to repeal the ACA — including its individual and employer mandates, and the excise tax on high-value health coverage — Republicans have also announced proposals to improve health savings accounts and how individuals choose to fund them.
Ed Fensholt, director of compliance services for Lockton Companies, discusses some of the potential changes Republicans seek to make, should presumptive GOP nominee Donald Trump win the presidential election against the Democrats’ presumptive nominee, Hillary Clinton.
EBA: One of the first changes mentioned by the GOP is an elimination of the employer and individual mandate because it is too complicated; what makes it so complicated?
Fensholt: The policy the ACA is trying to advance is to get everybody, or nearly everybody, in America covered on health insurance. One of the big problems in America, one of the cost drivers for health insurance, is people without medical insurance are still entitled to get medical care. If someone has a heart attack or a stroke and they don’t have health insurance, the ambulance is still going to come to their house and take them to the hospital and the hospital still has to take care of them; and there’s no pocket of money out there to help take care of that. What the hospitals do is take all that uninsured care and they roll it into the price of their services, so that when people with insurance come in to get help, they pay for it.
To keep insured individuals from taking on uninsured individual’s bills, legislators decided to make employers pay instead. Depending on the size of the employer, they need to offer some level of coverage to full-time employees, or at least barebones coverage to 95% of their employees and their kids. There are all kinds of rules around affordability and a lot of moving parts, so it gets extraordinarily complicated.
With the individual mandate, it’s the cornerstone of the ACA. [The government] wants to get everyone in the country covered and to get away from this uninsured care. So this forces everyone to get insurance, unless you are an illegal alien or in prison.
EBA: What is the GOP’s alternative to the current system?
Fensholt: The GOP’s alternative is to just get rid of employer and individual mandates. We don’t need it. If people want to buy insurance, let them buy it. If they don’t want to buy it, don’t make them buy it. If they want to buy it but they can’t afford it, we’ll find another way to do that. Like some tax credits, based on their income level. There will still be a lot of complexity around individual coverage, but the employer mandate will completely go away.
It is very difficult for employers to keep track of every employee and making sure they are paying out the correct amount to each person and making sure the proper documents are filed with the IRS so that they are not penalized for errors.
EBA: Moving into HSAs, how are they currently set up to be funded?
Fensholt: HSAs are really interesting. I call them the most tax advantageous savings vehicle ever designed by man. Because dollars — whether they are employee dollars or employer dollars — they go into these HSAs on a nontaxable basis. Some HSAs allow your account balance to be invested in mutual funds, like a little 401(k). If money is pulled out of the HSA for the right reasons you don’t pay tax on that, either.
The dark lining in this silver cloud is in order to be enrolled in an HSA you need to have an HDHP. It’s as if Congress said to us, “We’re going to give you these HSAs, but you are going to pay a little price.” This means as a general rule, you are going to pay out of pocket before you satisfy your high deductible. The plan was that this would drive down the use of medical care and, in turn, make insurance more affordable.
EBA: Can spouses to an employee fund an HSA or do they need to have their own?
Fensholt: If I have an HSA and my spouse is on that coverage, no she cannot make a contribution to my HSA. She has to open her own HSA and make contributions into that. Republican are saying if a couple is old enough to make catch-up contributions the spouse should not have to go out and setup his or her own HSA just to make that additional $1,000 a year contribution.
The current cap — assuming you are enrolled in an HDHP — the maximum annual contribution for employee-only coverage is $3,350. If I am enrolled in anything other than employee-only coverage, for example, employee plus spouse or employee plus children, I can make a $6,750 contribution. The catch-up contribution I can add on top of that is $1,000 if I’m over the age of 55. If my spouse is over the age of 55, I would like to be able to add another $1,000 onto that contribution, and with these proposals I would be able to do that.
EBA: What does expanding accessibility to certain groups mean?
Fensholt: Some groups, like TRICARE, only offer low-deductible coverage and that disqualifies individuals from participating in an HSA. What the GOP is saying is people with low-deductible coverage should also be allowed to have an HSA is they want it.
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