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House Republicans Pass Affordable Care Act Repeal Legislation

Publications | May 4, 2017

On May 4, 2017 the United States House of Representatives passed H.R. 1628, the American Health Care Act of 2017 (the “AHCA”), which repeals many provisions and protections of the Patient Protection and Affordable Care Act (the “PPACA”). The legislation now moves to the United States Senate, where it likely will be considerably revised.

The AHCA makes a number of changes to the PPACA, as well as other medical-related provisions in federal law. These changes generally include:

  • Repealing the PPACA’s cost-sharing subsidies.
  • Permitting health insurance issuers offering coverage in the individual or small group markets to charge higher rates for individuals who do not have continuous coverage.
  • Allowing health insurance offered in the individual or small group market to vary rates by 5 to 1 for adults (instead of 3 to 1 under the PPACA) or other such ratio as states may provide.
  • Allowing states to seek waivers that allow insurers to charge higher premiums for consumers with pre-existing conditions.
  • Allowing states to seek waivers of the requirement to offer “essential health benefits.”
  • Repealing the PPACA’s premium tax credit and replacing it with a refundable tax credit based on age and income.
  • Repealing the small employer health insurance tax credit.
  • Repealing the “individual mandate” penalty.
  • Repealing the “employer mandate” penalty.
  • Further delaying the excise tax on high-cost employer-sponsored coverage (colloquially referred to as the “Cadillac tax”).
  • Changing the definition of “qualified medical expenses” for health savings account (“HSA”) and health flexible spending arrangement (“FSA”) purposes so that over-the-counter drugs are considered qualified medical expenses.
  • Reducing the tax imposed on HSA distributions not used to pay for qualified medical expenses from 20% to 10%.
  • Eliminating the annual limitation for contributions to health FSAs.
  • Allowing health insurance providers to deduct remuneration paid to officers, directors and employees that exceeds $500,000.

The AHCA now moves to the Senate for consideration. The Senate is unlikely to pass the AHCA in its current form.

Employers should continue to comply with the PPACA until any legislation is enacted that modifies it. We are monitoring the AHCA legislation closely and will provide updates and action steps as it develops.
Additional Information

For additional information regarding the PPACA, AHCA or other employee benefits issues, please contact your Kutak Rock LLP attorney or a member of our Employee Benefits Practice Group.