Demonstrators outside the Supreme Court in advance of the court's rulling that the ACA was constitutional
Given the stark picture of the state of Obamacare painted by Republicans and President-elect Donald Trump, it’s logical to assume that an overhaul of health care is in the making in the near future.
“What we want to do is bring relief immediately,” Speaker of the House Paul Ryan said in an interview on Fox News in mid-December. “We are going to work on our repeal legislation immediately. And then we have to make sure that there’s that good transition period, so that people don’t have the rug pulled out from under them, and we can bring relief as quickly as possible.”
That said, and given the speed with which he promises to act, what immediate changes might take place, and what should employers and individuals do now during the next few months?
“Currently, nothing has changed,” said Nicole Elliott, former IRS senior director of operations for the Affordable Care Act, and a tax partner at Holland & Knight.
“It’s still business as usual,” said Colleen Murphy, tax expert at Bloomberg BNA. “Employers should definitely move forward with the normal filing requirements for the next filing season. There are specific responsibilities they have under the ACA, so they should operate under the assumption” that those are still in place.
“For Tax Year 2016, employers should stay the course and be prepared to meet their ACA filing obligations,” agreed Janice Krueger, a subject matter expert at Greatland.
In a similar vein, Padgett Business Services president Roger Harris cautioned, “The ACA is still the law. Nothing has changed because of the election. Employers still have to offer health insurance despite what Republicans may say. Nothing has happened, so people should not get ahead of themselves and assume ACA has been repealed, because it is still the law of the land.”
“That means that employers who employ an average of at least 50 full-time employees during the preceding year are known as applicable large employers [ALEs] and are required to file Form 1095-C, Employer-Provided Health Insurance Offer and Coverage, for each of its full-time employees,” noted Krueger. “Employers who employ less than 50 full-time employees, but are self-insured, are required to file Form 1095-B, Health Coverage, for employees enrolled in coverage.”
“Employers are required to file one copy of Form 1095 to the IRS and provide an additional copy to the employee,” she noted.
Deadlines old and new
In November 2016, the IRS announced that the filing deadline to furnish 1095 statements to recipients and employees was extended from Jan. 31, 2017, to March 2, 2017, Krueger noted. “This extension reduces the burden on employers, especially since the deadline to file W-2s to the Social Security Administration for Tax Year 2016 was moved up to Jan. 31, 2017,” she said. “Employers should note that the deadlines to file 1095s to the IRS remain as originally published, which are Feb. 28, 2017, if filing to the IRS on paper, and March 31, 2017, if filing to the IRS electronically.”
There likely won’t be changes in the ACA until at least Tax Year 2017, according to Shelia Clark, director of The Income Tax School. Cathy Mueller, director of operations for Peoples Income Tax, agreed. “With all the people that have signed up in the Marketplace, any immediate change would be too abrupt,” she observed. “They have to give time for policyholders to adjust to the changes, and they will need time to implement any change in the current rules.”
“There are a lot of enrolled individuals in the state marketplaces, and insurers who are raising concerns about removal of cost-sharing subsidies,” observed Brian Ashcraft, director of Tax Compliance at Liberty Tax. “We’re in a quandary as to how to fix the ACA without impacting the people that are enrolled in it and the insurers. It’s hard to put the banana back in the peel once it’s been opened.”
“Don’t trust anyone who says they can read the tea leaves,” said Holland & Knight’s Elliott. “We still don’t know exactly what will happen or when it will happen. It’s a really challenging time to figure it all out. My guess is that we’ll see some movement very early on in the new administration through a reconciliation bill, which can pass the Senate without a super-majority; my guess is that it will look similar to H.R. 3762, that was passed in 2015 but vetoed by President Obama. It repealed the employer mandate and made the repeal retroactive to the first day of the calendar year, but it did not speak to employer information reporting. They can do things like that quickly through the reconciliation process.”
“The problem is that they can do things through the reconciliation process that have a budgetary impact, but they can’t do everything,” she said. “I anticipate they will use the budgetary reconciliation process to get rid of certain parts of the ACA.”
“For example, the requirement that employers cover contraception, or the prohibition on employers paying for individual health care coverage – these were done largely through regulatory guidance, and that’s a quick way to undo things that have been done,” she said.
“The question remains, though, what will be the replacement plan and what will be the transition? Trump has said he wants a smooth transition, and he doesn’t want people to lose coverage,” she said. “The other big issue is how will you get Democrat support?”
What might last?
There are two pieces of the ACA that will likely be in a future iteration, according to Bloomberg BNA’s Murphy. ”Those are the pieces that Trump has said he likes – the ban on denying coverage for pre-existing conditions, and coverage for young adults under their parents’ plan until they are 26.”
“A top lawyer at the IRS said recently that if the ACA were repealed, it would give the agency more time to adjust to other areas of tax policy,” she observed. “So there could be a silver lining if Congress passes a streamlined or stripped-down version of the ACA.”
“More than likely any changes will not be effective immediately,” said Harris. “So it’s more than likely we’ll have the ACA for all of 2017, and probably all of 2018 and maybe longer. Repealing is easier than replacing – they have to give themselves time to wrestle through the economics of a new health care system, particularly because they want to continue to offer insurance for pre-existing conditions and up to 26 years for young adults.”
By mid-December, the $100-per-day penalty per employee on employers who reimburse workers for the cost of health insurance appeared to be gone. The House had passed, and the Senate was expected to pass, a bill allowing small businesses to compensate their employees for the cost of health insurance. President Obama had said he would sign the legislation. The penalty itself appears nowhere in the ACA.
In addition to H.R. 3762 (the 2015 repeal of much of the ACA through the reconciliation process, which was vetoed), experts suggest looking at the policies of Rep. Tom Price, R-Ga., current chairman of the House Budget Committee and nominated head of Health and Human Services in the incoming administration. Price, an orthopedic physician, authored the Empowering Patients First Act as an alternative to the ACA, which he has criticized as putting the government in the middle of the patient-doctor relationship. Many of Price’s proposals are included in the GOP’s “Better Way” proposals put forth by Speaker Ryan.
Price’s plan offers a refundable tax credit for health insurance coverage that people can buy on the private market. The amount of the credit starts at $1,200 for those between 18 and 35 years of age, and rises to $3,000 for those 50 years and older. On purchase, individuals would have the option of receiving an advanced refundable credit.
His plan would expand health savings accounts. Those who have pre-existing medical conditions could not be denied coverage so long as they had 18 months of continuous insurance before selecting a new policy under Price’s plan.
Employer exclusions for health care coverage would be limited to $20,000 for a family and $8,000 for individuals, in order to discourage companies from offering overly generous insurance benefits. The Better Way plan proposes a cap on the employer exclusion without specifying an amount. And, under Price’s plan, states could receive grants for providing health benefits coverage through a high-risk pool, a reinsurance pool, or other risk-adjustment mechanism used for the purpose of subsidizing the purchase of personal health insurance.
And there’s one more twist that adds uncertainty to what will happen next. In May 2016, under litigation by the House against the Obama Administration, the District Court for the District of Columbia enjoined any further payments to health insurers for the ACA’s cost-sharing reduction program. The Obama Administration filed an appeal. In December, the district court “importantly, and unexpectedly, granted a motion by the House to hold the matter in abeyance until after President-elect Donald Trump takes office,” according to Holland & Knight’s Elliott. “This is a significant development throwing more uncertainty into the future of the ACA and undoubtedly causing concerns among health insurers,” she said. “Once President-elect Trump takes office, he can instruct the Department of Justice to abandon the appeal. If that happens, the district court’s decision would stand and the government arguably would not make further cost-sharing reduction payments to insurers.”
Although Trump has called for a transition period to ensure some continuity of coverage for individuals receiving insurance through the Health Insurance Marketplace, “The elimination of cost-sharing reductions could have serious implications for the affordability of continued coverage under the ACA, even for a transitional period,” she said.
Roger Russell is senior editor for tax with Accounting Today, and a tax attorney and a legal and accounting journalist.