Understanding The Proposed AHCA

Understanding The Proposed AHCA

Obamacare has been the subject of both scrutiny and controversy since it was first introduced, leading the government to come up with new proposals to shore up its shortcomings. One proposal has been the AHCA, or American Health Care Act. It has been presented as a law that replaces and repeals Obamacare, and below are the ways in which it will do so.

Many of the taxes which are present in Obamacare will indeed be removed by the new act, while also making changes to Medicaid and the manner in which it is funded. At the same time, there are a number of Obamacare features that it will keep, and the new bill is facing opposition from both Republicans and Democrats. Below is what is known so far; bear in mind that all these features could be altered or changed at any time.

Individual And Employer Mandates Will Be Removed

The new act will eliminate mandates for individuals and employers through zeroing out penalties which are placed on those who do not have essential minimal coverage (individuals) or adequate essential minimum coverage for employees who work full time (employers). Rather than placing a tax penalty on those who are not enrolled, the new bill will encourage individual coverage through giving insurance carriers the ability to enact a premium surcharge of 30 percent on those who do not have continuous coverage. This surcharge seems to be a way of preventing people from waiting to get health insurance until they have an emergency.

The Cadillac Tax Will Be Repealed

Although the new bill promises to repeal the Cadillac Tax, in fact the new law will technically delay it until 2025. Originally it was planned to go into effect in 2018, but because the new act also involved the reconciliation of budget, this new delay is more than likely one step towards repeal in the future. The Cadillac tax is one employers will want to keep their eyes on.

Reporting Obligations For Employers Will Continue

While mandates for employers and individuals will be removed, there is a strong likelihood that the reporting obligations for the new bill will remain, especially for forms 1095 B/C and 1094 B/C. Individuals will be capable of acquiring premium credits when buying Marketplace coverage until 2020. As such, the reporting requirements which are listed under the 6055 section within the Internal Revenue Code are important. Tax credits would be made available under the new law after 2020, which means the IRS will still require employers to report some data involving coverage.

The New Tax Credit System Could Cause Administrative Problems For Plan Sponsors

Perhaps one of the most controversial aspects of the new bill is the advanced tax credit component. Although it appears to be similar to the premium tax credits which are within Obamacare there are some differences. Individuals who are a part of group health plans won’t be able to receive the tax credit, unless they acquire COBRA coverage. Additionally, to get the credit, the coverage must not cover any services which are related to abortion. This arrangement has led to complaints as it is believed it will cause issues for plan sponsors.

Update: At current time of writing, the proposed AHCA has not obtained clearance to go into effect. This is the first big blow for Trump’s administration, so we will still have to wait and see how the proposed AHCA will be amended in order to be accepted for public implementation.