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Policy Watch - Health Care

An affordable, innovative and efficient health care system is essential to ensuring a productive and competitive U.S. workforce, as well as a better quality of life for all Americans. As the providers of health care coverage to more than 177 million Americans, employers and the plans they provide to employees and their families are the bedrock of the U.S. health care system. Enacted in 2010, the Affordable Care Act (ACA) brought about major reforms in health care coverage in the United States, affecting both insured and self-insured employer-sponsored health care plans.

Although the ACA has expanded access to health insurance for an estimated 20 million Americans and the U.S. uninsured health rate is at a historic low of 8.6 percent, increasing health care costs continue to place a growing burden on individuals, U.S. businesses and the economy.

According to the 2016 Kaiser Health Benefits Survey, the average annual premiums for 2016 for employer-sponsored health insurance are $6,435 for single coverage and $18,142 for family coverage. Each rose 3 percent over average 2015 premium levels. In addition, the U.S. Department of Health and Human Services announced that in 2017 the health insurance premiums on the ACA’s Exchanges are expected to increase an average of 25 percent across the 39 states served by the federally run online market and that about 1 in 5 consumers will only be able to choose health care coverage from a single insurer, after major national carriers such as UnitedHealth Group, Humana and Aetna scaled back their participation in the Exchanges. The continued increase in health insurance premiums is outpacing both inflation and wage increases, making health care costs one of the primary concerns of chief executives.

Despite the rising cost of coverage and the complexity of the ACA, there is little evidence that employers are planning to abandon health care coverage for their employees. Many organizations are changing health care benefits or turning to other health care design strategies, such as health savings accounts, private exchanges, wellness programs and disease management programs to manage costs. It is important that public policies support the efforts of employers to improve the affordability and quality of U.S. health care.

 

Current Issues

Vote on The American Health Care Act Canceled in the House of Representatives 
The House of Representatives was scheduled to vote on H.R. 1628, the American Health Care Act (AHCA), Friday, March 24. However, after negotiations to garner the support of conservative and some moderate GOP lawmakers did not result in a final deal, the vote was canceled. House Republicans needed to secure the support of 215 lawmakers out of their 237 member caucus to pass the bill.  This meant that Republicans could only lose 22 votes in order to pass the bill out of the chamber. On Friday afternoon just hours before the scheduled vote Speaker Paul Ryan (R-WI) visited the White House to tell President Donald Trump that the bill lacked the votes necessary for passage. 
The future of H.R. 1628 looks challenging. In a press conference following the canceled vote Speaker Ryan said “Obamacare is the law of the land and we’ll be living with this law [ACA] for the foreseeable future.”  Furthermore, Speaker Ryan said that the Republican Conference will proceed with its agenda and will now turn its attention to other priority issues like tax reform.

Congress, however, is still likely to consider targeted legislative proposals to make modifications to the ACA.  In addition we could expect to see regulatory changes. The White House posted a document indicating that the AHCA was the first step in a three-step plan to repeal and replace the ACA. In short, (1) pass the American Health Care Act, (2) make additional changes to the rules that govern the ACA through the regulatory process and (3) pass other health care legislation to address the elements of the ACA that need reform.  

H.R. 1628 the American Health Care Act, was designed to replace tax elements of the Affordable Care Act (ACA).  As previously reported, the American Health Care Act was created under the budget reconciliation process and is limited in its scope to amend only the tax provisions of the ACA. 

The following specific issues are of particular concern to human resource executives and the organizations they serve:

  • The 40 Percent Excise Tax. A number of provisions in the ACA attempt to address the burden of health care costs on employers. Nonetheless, one provision aimed at lowering these costs—namely the 40 percent tax on health care benefits—will have a number of serious, unintended consequences.
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  • EEOC Regulation of Employee Wellness Programs. Employer-sponsored health care plans are increasingly implemented to improve employee health and enhance productivity. The ACA allows employers to provide financial incentives to participants in a wellness program of as much as 30 percent (up from 20 percent) of the total cost of coverage when tied to participation in the program. Despite the explicit authorization of incentive-based wellness programs in the ACA, however, the Equal Employment Opportunity Commission (EEOC) has challenged employer wellness programs.
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  • The Tax Treatment of Employer-Sponsored Health Care. According to a report from the Congressional Budget Office and the staff of the Joint Committee on Taxation, one of the largest revenue losses for the federal government is due to the preferential tax treatment of employment-based health care coverage. Under current law, the value of both employer and most employee contributions for health insurance are excluded from employee federal income tax and employer and employee payroll taxes.
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  • Definition of Full-Time. Under the ACA, employers with more than 50 full-time employees are required to provide affordable group health insurance coverage to employees and their dependents or face financial penalties. The ACA defines a full-time employee as an individual who works an average of at least 30 hours per week.  
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