The GOP health plan: What employers need to know
With the new GOP health plan eliminating the employer mandate and pushing back the Cadillac tax implementation from 2020 to 2025, industry experts say the bill is good news for employers as it will give them more opportunities to improve their employee health plans, especially when it comes to expanding the use of health savings accounts.
Congressional Republicans Monday night released their plan to replace the Affordable Care Act, called The American Health Care Act. The new measure — which will be reviewed by the House Ways and Means and Energy and Commerce committees beginning Wednesday — removes the requirement for large employers to offer health insurance to full-time employees. The new bill also will allow employers to offer more robust health programs to employees and their families as the onus of taxes and fewer regulations is removed if the bill is passed, experts say.
“If you asked me 48 hours ago, I would say that the mood was doom and gloom, but now the outlook is great for employers,” says James Gelfand, senior VP of health policy for The ERISA Industry Committee, a national association that advocates for large employers on health, retirement and compensation public policies. He says employers will now have relief from a host of taxes, such as the Cadillac Tax and other surcharges.
"They are going to maintain plan design flexibility, and have more flexibility than they had under the Affordable Care Act,” he says of the new plans that might arise from the GOP bill if it is signed into law.
“This is an opportunity for things to improve and get better,” he adds. “We have dodged a major, major bullet.”
That bullet was the Cadillac tax, which is now going to be instated in eight years. Some industry observers hoped that the controversial tax would have been eliminated outright in the new GOP plan, but they suspect it may still be killed in the future version once it leaves the committees in the House and goes to the Senate.
This will have a huge impact on employers as they plan their benefit strategies for 2018.
“While we would have liked to have seen [the Cadillac tax] delayed further, I think this delay gives employers some sense of predictability as they plan ahead for their benefit offerings,” says Chatrane Birbal, senior advisor, government relations, for the Society for Human Resource Management.
Instead, benefit executives can budget their plans accordingly without factoring in a seemingly imminent Cadillac tax that was set to go live in three years. “Now you’re not thinking [of] the potential of this excise tax [that was] going to go in effect in 2020. Now, it’s further away in 2025. In a sense, it gives them more predictability and stability as they model their healthcare benefit offerings at least for the next few years,” Birbal says.
Under the new plan, participation in health savings accounts is poised to increase dramatically.
The GOP plan "expands the allowable size of health-care savings accounts that can be coupled with high-deductible insurance plans, up to $6,550 for an individual or $13,100 for a family," according to a Bloomberg new article.
“But if you tag the HSA contributions to the maximum out-of-pocket as this legislation would do, suddenly you are making HSAs and the HDHPs immensely more attractive. I would not be surprised if offering of those just skyrocketed,” he says.
Critics of ACA have claimed that it was mired in regulations and the prospect of fewer regulations in a GOP plan will ease the workload of employers, argues Steve Wojcik, vice president, public policy at the National Business Group on Health.
“There might be a reduced administrative burden for employers,” says Wojcik, adding that employers may want to review their HSA and FSA account programs as they prepare for 2018 under the new rules.
Under the new plan, “you can retroactively pay for medical expenses through your HSA if you are slow in establishing your account,” he says. He says employees will have 60 days to file HSA claims.
Also, the new plan will allow FSAs to cover over-the-counter prescription drugs and it eliminates the $2,500 limit on health FSAs, according to Garrett Fenton, a benefit attorney with Miller & Chevalier.
He adds that employers that offer retiree prescription drug coverage will now get the “double deduction” back so they can deduct from their taxes the entire amount they spend on retiree prescription drug expenses. “Even if they get a retiree drug subsidy from the federal government, they can still deduct the entire amount that they spend and get reimbursed,” he says.
The new plan could appeal to employers of a mostly millennial workforce. “Because the employer mandate is not out there, you are going to see more variation of coverage in the future. Employers will work to make sure their benefits that they offer are specifically tailored to meet the needs of their specific populations,” Gelfand says.
“Millennials are young and they know that they are not going to have many health claims, they are going to want something cheap. Under the ACA, it was one-size-fits-all. It’s the reason those millennials never bought insurance on the exchanges,” he says. “So if you’re an employer in Silicon Valley and you have a bunch of 22-year-old males, they want a different offering than what a manufacturer with seniors and women in your workforce.”
That said, the final price tag of the bill is still unknown and has yet to meet the approval of moderate Republicans. “We don’t have any scores from the CBO and we don’t know how much this is going to cost the government,” Fenton says. “Also, we don’t know how many people will lose coverage under these proposals.”
But, he adds, “if it were to pass in its current form, I think employers would generally welcome it.”