Senate Releases Discussion Draft of Health Care Reform Legislation
Thursday, June 22, 2017
Senate Republican Leadership Releases Discussion Draft of Health Care Reform Legislation
This morning, Senate Republican leadership released a discussion draft of its version of health care reform legislation, entitled the Better Care Reconciliation Act of 2017 (the “BCRA”). Links to the legislative text and an explanation of the bill are below. This Senate bill is the next step in the process of passing a health care reform bill to be sent to President Trump for his signature. The first step was the passage by the House of Representatives of its version of health care reform, the American Health Care Act. The Senate bill follows the same format as the House-passed bill, with the intent of repealing as much of “Obamacare”—the Affordable Care Act (the “ACA”)—as possible under the budget reconciliation rules. Passing this legislation under budget reconciliation rules is important since, under these rules, a bill cannot be filibustered in the Senate and can by passed by a simple majority vote.
Provisions of Interest to ECFC Membership
On the issues that ECFC membership care most about, the BCRA contains the same provisions to the House-passed health reform bill. These provisions are:
Excise Tax on High Cost Health Plans (the “Cadillac Tax”): The Cadillac Tax was currently set to become effective in 2020; under the BCRA, the effective date of the Cadillac Tax will be pushed back until 2026. Because of the budget reconciliation rules, postponement of the excise tax was the only option available in this bill.
Over-the-Counter Medicines: The ACA provided that the only medicines or drugs that are prescribed or insulin would be considered qualified medical expenses eligible for reimbursement from a Flexible Spending Arrangement (“FSA”), Health Savings Account (“HSA”) or Health Reimbursement Arrangement (“HRA”). This provision of the ACA would be eliminated effective for amounts paid or expenses incurred after December 31, 2016.
Additional Tax on HSA Distributions Not Used for Qualified Medical Expenses: The ACA increased the excise tax on distributions from an HSA from 10% of the distribution not used for qualified medical expenses to 20% of the distribution. Under the BCRA, that additional tax will revert to 10% for distributions made after December 31, 2016.
Cap on Employee Contributions to an FSA: The cap on employee contributions to an FSA imposed under the ACA is eliminated for taxable years beginning after December 31, 2016.
Increase in HSA Contribution Limit: Under current law, contributions to an HSA are limited by a monthly amount which is adjusted for cost of living increases. The recently-announced contribution limited for HSA contributions for 2018 is $3,450 for single coverage and $6,900 for family coverage. Under the BCRA, the maximum contribution to an HSA will be equal to the sum of the annual deductible and the out-of-pocket expense maximum for single ($6,550) or family coverage ($13,100). This change will be effective for taxable years beginning after December 31, 2017.
Catch-Up Contributions for Spouses: The BCRA will permit both spouses that are eligible to make additional catch-up contributions to a single HSA. This will be effective in taxable years beginning after December 31, 2017.
Treatment of Medical Expenses Incurred Prior to the Establishment of the HSA: Under current law and regulations, only medical expenses incurred after the establishment of an HSA are considered eligible medical expenses that can be reimbursed from the HSA. The BCRA addresses the administrative problems connected with this requirement by providing that as long as the HSA is established within 60 days of the date of coverage under the eligible high deductible health plan begins, any medical expenses incurred after the coverage date of the high deductible plan will be considered eligible medical expenses regardless that the expenses may be incurred prior to the establishment of the HSA. This provision will be effective with respect to coverage beginning after December 31, 2017.
Senate Majority Leader Mitch McConnell plans to have the Senate vote on this bill before the Senate leaves for its Fourth of July recess. Since the bill is being considered under budget reconciliation rules, Senate Democrats will not be able to filibuster the bill. With no Senate Democrats supporting this bill, at least 50 Republican Senators must vote for the bill for it to pass the Senate with Vice President Pence supplying the vote to break a deadlock. Since it was a discussion draft that was released today, there is the possibility that further changes will be made to the legislation to secure the requisite number of Republican votes. The Congressional Budget Office (“CBO”) and the Joint Committee on Taxation (“JCT”) will also provide estimates as to the cost of the bill soon. (Note that the House passed its bill without having the CBO and JCT estimates.) In addition, the Senate Parliamentarian will likely be called to rule on whether the bill meets the budget reconciliation rules, allowing the Senate to pass the bill by a simple majority. Clearly, a lot needs to happen in the next week for the Senate to vote on the bill by the Fourth of July recess.
If the Senate passes the bill, the next step will be for the House of Representatives to determine whether it will accept the Senate’s changes to its bill or whether it wants to negotiate with the Senate on the bill’s provisions in a House/Senate conference. If House Republicans accept the Senate version (again, no House Democrat will vote for this bill), this will be the legislation sent to President Trump for his signature – a long and complicated process to partially fulfill the Republicans’ campaign promises to repeal Obamacare.
View the bill here.
William F. Sweetnam, Jr
Legislative and Technical Director
Employers Council on Flexible Compensation—ECFC