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Compliance Corner: ACA 2018 “Affordability” & Repeal Update

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The IRS released the 2018 required contribution percentage for the “affordability” threshold under the Affordable Care Act (ACA). The percentage will decrease to 9.56% from 9.69% in 2017. As a reminder, under the ACA’s Employer Shared Responsibility provision – which is still applicable as of now -  “applicable large employers” (generally, those with 50+ employees) must offer an affordable, minimum value health plan to their full-time employees and child dependents or be subject to a §4980H penalty for each full-time employee who receives a subsidy to purchase health insurance through the Marketplace / Exchange.

View Summary of Information on Affordability

View Rev. Proc. 2017-36 

Update on ACA repeal:  Senators are busy reviewing the ACA repeal bill “Better Care Reconciliation Act of 2017” released this morning.  The bill will be scored by the Congressional Budget Office to estimate its impact on the budget and insurance premiums as well as the number of insured individuals. Senate Majority Leader Mitch McConnell plans to hold a vote next week and hopes to get the 50 votes needed to pass it.

The discussion draft of the bill, which is expected to change prior to the vote, appears similar to the American Health Care Act (AHCA) passed by the House of Representatives in May.

Similarities between the bills:

  • Eliminates the employer and individual mandate penalties beginning in 2016
  • Increases Health Savings Account (HSA) contributions and flexibility regarding other HSA provisions
  • Repeals several taxes, such as OTC medications reimbursed through an HSA or FSA, Medical Device Tax, Health Insurance Tax, Medicare Tax Increase, Net Investment Tax
  • Removes Health Flexible Spending Account (FSA) contribution limit
  • Delays the Cadillac Tax

Key differences (less directly affects employers):

  • States would not be able to waive out of certain rules that impact Essential Health Benefits and coverage for individuals with a gap in health plan enrollment
  • Exchange / Marketplace subsidies would be maintained with increased eligibility standards effective in 2020
  • ACA’s Medicaid expansion would phase out beginning in 2021 with future funding based on a block grant or similar approach

View Comparison of ACA, AHCA and BCRA

WHAT THIS MEANS TO EMPLOYERS:  Employers who are subject to the ACA’s Employer Shared Responsibility provision and who want to avoid exposure to penalties for not offering an affordable, minimum value health plan should review their employee contribution strategy to ensure that the total employee cost for enrollment in single coverage is no more than 9.56% of income for 2018.  In order to meet this requirement, some employers will have to decrease the cost to employees for next year.

All employers should stay abreast of the progress of ACA repeal and replace measures.  Until actual changes are made to the law, employers must maintain compliance with current rules to avoid potential adverse consequences.