United States: Issue 106: ACA "Repeal And Replace" Bill Released, Faces Early Congressional Opposition

This is the one hundred and sixth issue in our series of alerts for employers on selected topics on health care reform. (Click here to access our general Summary of Health Care Reform and other issues in this series.) This series of Health Care Reform Management Alerts is designed to provide an in-depth analysis of certain aspects of health care reform and how it will impact your employer-sponsored plans.

Background:  On March 6, Congressional Republicans released the American Health Care Act (AHCA), pitched as the "repeal and replacement" of the Affordable Care Act. (The AHCA is actually currently two parts generated by different committees, but they'll be combined for a vote and we will refer to them as a single bill for purposes of this alert.) This alert is focused primarily on the potential impact of this bill on employers and plan sponsors, although we will also highlight some of the other significant provisions included in the proposal. Notably, while the bill would drive significant changes in the large group market, the AHCA's primary focus and most of its changes impact the individual and small group markets. 

Regulatory Outlook: 

To be clear, the AHCA still faces significant hurdles before it could become law, including: 

  • Democrats appear to be uniformly aligned against any efforts to repeal the Affordable Care Act.  
  • Within hours of the AHCA's release, Republicans faced opposition from one wing of the party with respect to the AHCA's new tax credits, and from another wing of the party with respect to the AHCA's Medicaid expansion phase out.  
  • Four Senate Republicans have already declared they will not vote for a bill that includes a rollback of the Medicaid expansion (although they subsequently suggested the bill was a step in the right direction).  
  • The AHCA has also been dubbed "Obamacare Lite" by several conservative interest groups that are influential in Republican circles.  
  • President Trump's HHS Secretary, Tom Price, has labeled it a "work in progress."  
  • Congressional Republicans are pushing for a House vote on the bill before the Congressional Budget Office finishes scoring the bill (to determine the impact on cost and coverage).  To the extent the CBO estimate becomes available during the voting process, and to the extent the numbers suggest significant coverage losses or increased deficit, that could lead to more defections within the Republican Party. 

Process Considerations 

While coined a "repeal and replace" bill, the AHCA actually leaves most of the Affordable Care Act in place and builds on/modifies its framework. Due to Senate rules, a complete "repeal" of the Affordable Care Act would require 60 votes, which the Republicans cannot muster (As noted, Democrats in the Senate have generally vowed to fight any efforts to repeal the Affordable Care Act). That said, as discussed in Issue 102, Senate rules would permit modifications to revenue- or budgetary-related provisions through a process called "reconciliation," which only requires 51 votes. As a result, Republicans are limited in what they can address through the AHCA (although President Trump has vowed to address non-reconciliation-eligible provisions, such as permitting the sale of insurance across state lines, through subsequent efforts). It is also important to note that the Senate Parliamentarian has not yet weighed in on whether all of the AHCA's provisions are eligible for inclusion in a reconciliation bill.  

What Remains?  

As noted above, much of the ACA is ineligible for repeal through reconciliation.  As a result, the following provisions will remain in full force and effect, subject to the possibility of future regulatory or legislative action (this list is not comprehensive):

  • Prohibition on lifetime and annual dollar limits
  • Adult child coverage mandate
  • Limit on out-of-pocket maximums
  • Insured plan income non-discrimination standard (to the extent the IRS lifts its enforcement moratorium, which seems unlikely before 2020 at the earliest)
  • Required coverage for routine costs for clinical trials
  • ACA reporting standards**
  • Preventive service mandate
  • Ban on pre-existing condition exclusions*
  • Provider nondiscrimination requirements
  • Section 1557 nondiscrimination standards 
  • Ban on rescissions
  • Cadillac tax (eligible for repeal through reconciliation, but retained in the AHCA)**

* Although see Continuous Coverage requirement discussed below

**See detailed discussion below

Next Steps

Congressional mark-ups of the bill begins today, and we can expect various changes to the AHCA before it goes to vote.  Early reports suggest Republicans are attempting to push for a quick vote on the bill, which risks criticism of rushing the bill and not permitting for sufficient consideration (similar to the criticism Democrats faced during the Affordable Care Act debate).  Republicans are targeting a vote in the House by late March, with a Senate vote to immediately follow no later than April 7th (when Congress goes on a two-week recess).  

The following chart aligns how various health care issues are addressed in the existing ACA versus the GOP's currently proposed AHCA.

Effective  Date of Change
Encouraging Healthy Individuals to Purchase Coverage Individual Mandate Continuous Coverage Penalty: Individuals with a break in coverage in excess of 63 days must pay a 30% premium surcharge to the insurance carrier to re-enroll in coverage 2019 (individual mandate penalty reduced to $0 beginning in 2016)
Cost of Coverage Income-based credits to assist lower-income individuals purchasing health insurance
Age-based credits only:
$2,000 < 30
$2,500 between 30 and 40
$3,000 between 40 and 50
$3,500 between 50 and 60
$4,000 > 60
Capped for persons earning in excess of $75,000 ($150,000 for joint filers)
Premium Rating
  • May not charge more for health status (i.e., pre-existing conditions)
  • Older enrollees may not be required to pay more than 3x the rate of younger enrollees
  • May charge 30% more than standard rate where lapse in coverage
  • Older enrollees may not be required to pay more than 5x the rate of younger enrollees
  • 2019
  • 2018
Risk Pools
Funding for temporary high risk pools between 2010 and 2014
Marketplaces with shared risk pooling effective 2014, with high cost claims offset by new taxes (such as the Transitional Reinsurance Program fee)
$100B over 10 years into funding state efforts; up to states as to how to apply 2018
Medicaid State expansion funded by Federal Government Gradual phase out of expansion; shift Medicaid funding to block grants (i.e., federal contribution is set subject to income inflation), meaning states carry the primary risk 2020
Excise Tax on High Cost Health Plan 40% Cadillac Tax 40% Cadillac Tax 2025 (delayed from existing effective date of 2020)
Employer Mandate Large employers must offer coverage to full-time employees, or pay a penalty No penalty for failure to comply with the employer mandate 2016
Health Savings Accounts Increases the excise tax on non-medical withdrawals from 10% to 20%
  • Reduces the excise tax on non-medical withdrawals back to 10%
  • Permits deposit of age-based tax credits into an HSA
  • Significantly increases HSA contribution limits to the inflation-adjusted deductible/out-of-pocket maximum limits for HDHPs
  • Permits reimbursement of expenses incurred pre-HSA establishment, if HSA is established within 60 days of the date qualifying HDHP coverage commences
  • Permit both spouses to make catch-up contributions to an HSA
Retiree Coverage Eliminated deduction for employers who receive a Medicare Part D prescription drug subsidy Reinstates deduction for employers receiving Medicare Part D prescription drug subsidy 2018
Over-the-Counter Drugs Prohibits tax-free reimbursement for over-the-counter drugs (e.g., through HSAs, FSAs, etc.) Removes prohibition on reimbursement for tax-free over the counter drugs 2018
Health Flexible Spending Cap Capped health FSA contributions at $2,500 (adjusted for inflation) Removes health FSA cap 2018
Additional Medicare Tax for High Wage Earners/Net Investment Income Imposed an additional 0.9% Medicare HI tax for high wage earners and 3.8% tax on certain passive income Removes additional Medicare HI tax and tax on passive income 2018

FAQs on the Proposal

Does the AHCA place a cap on the employer tax exclusion for health coverage? 

No.  An earlier leaked version of the bill included such a cap, but this version eliminated that provision and reinstated the Cadillac Tax (subject to a five year delay to 2025-- seven year delay from the original effective date of 2018).  

Does the AHCA eliminate the 1094/1095 employer/plan reporting obligations? 

The bill is not entirely clear on the proposed approach to ACA reporting.  Given that there remains a tax credit (albeit in a new form) that will be unavailable for persons enrolled in coverage or offered employer coverage, reporting will have to remain, in some form, under the Republican proposal. The bill suggests that reconciliation cannot be used to repeal the reporting standard (or the associated penalty for failure to report). The bill would replace the current reporting standard with a simplified report (included on the Form W-2), but it appears this new provision wouldn't be effective until 2019. Many unanswered questions remain, including what type of coverage "offer" would render an individual ineligible for a tax credit (e.g., will there be an affordability and/or minimum value standard?).  

Does the AHCA eliminate the employer mandate?

Technically, no. It appears Congressional Republicans determined that reconciliation would not permit an elimination of the employer mandate, so they instead reduced the penalty to $0, effective January 1, 2016. That said, if there is no penalty, it appears there is no enforcement "stick" to encourage compliance. Notably, this is a retroactive change, meaning the IRS's enforcement efforts (if any) relating to the employer mandate would likely be limited to failures to offer coverage during the 2015 calendar year.  

Does the AHCA address the cost of prescription drugs?

No. Despite President Trump's periodic suggestions that he would force drug companies to reduce their prices, it is not directly addressed in the AHCA. This type of provision would appear to fall outside the scope of changes permitted to be addressed through reconciliation. So, to the extent Congress intends to respond to this concern, they may attempt to address it through a separate bill (although historically Republicans have opposed such efforts). 

How will the AHCA compare to the Affordable Care Act from a cost and coverage perspective?

That is unclear as the proposal has not been scored by the CBO (and may not be scored before Congress votes). Some reports suggest that the earlier leaked version of the AHCA received a preliminary CBO score showing significant coverage losses combined with costs in excess of the Affordable Care Act. It appears that some of the changes from the earlier leaked bill (such as reinstituting the Cadillac tax, albeit with an additional delay) may have been intended to drive a better CBO report.  

What does the AHCA say about covering abortion services?

This provision does not appear to impact employer-provided coverage. However, an individual cannot buy health insurance coverage that includes abortion services and still qualify for the tax credit. 

How does AHCA address the important Issue of tanning salons?

Good news, bronzed beauties! The bill would repeal the Affordable Care Act's 10% excise tax on tanning salons.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions