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The Repeal of the Affordable Care Act and What It Could Mean for Employers

On May 4, 2017, the U.S. House of Representatives passed H.R. 1628, as amended, commonly known as the American Healthcare Act, or in more colloquial terms, the Obamacare Repeal Bill (herein referred to as the “Act”). Although its fate in the Senate is unknown, some provisions of the Act may have an impact on employers.

First, under the Act, certain employers would no longer be required to offer an affordable healthcare plan to employees. Current law requires employers with at least 50 employees to provide the opportunity for employees to enroll in minimum essential coverage under an employer-sponsored plan to full-time employees.

Second, the Act would delay the imposition of a tax on “premium” health care plans offered by employers, known as the “Cadillac Tax”, until 2026. The Cadillac Tax was set to go into effect at the beginning of 2018. It would impose a 40% tax on the “excess benefit” on high-cost insurance plans. This means that employers would be taxed on individual plans that cost over $10,200 for an individual plan and $27,500 for a family plan.

The Act also allows employers and employees increased flexibility with health savings accounts or flexible spending accounts. The Act proposes to cut the 20% tax on contributions to health savings accounts not used for qualified medical expenses to 10%. Further, the Act would eliminate the limitations on contributions to flexible spending accounts. Finally, the Act would allow both spouses to make catch-up contributions to the same flex spending account.

From an employer’s perspective, the Act could bring relief to large employers in the face of rapidly-increasing health-care premiums. Employers would also be given more flexibility to offer an array of benefits in lieu of healthcare coverage.

As noted above, the Senate version of the Act could be completely different, if it gets through the Senate at all.