July 17, 2017 —

Employer information reporting remains intact under both Senate ACA replacement bills currently in play:

• Majority Leader Mitch McConnell has released the Senate’s second iteration of the Better Care Reconciliation Act which, as written, would maintain employer information reporting obligations under Internal Revenue Code §§ 6055 and 6056. Changes to minimum essential coverage provisions may give rise to a potential modification of those reporting requirements at some point in the future, as the law would allow individuals to maintain coverage that does not comply with federal regulations.
• At the same time, Senators Bill Cassidy and Lindsey Graham announced an alternate plan aiming to compete with the BCRA for the 50 votes needed to repeal and replace the ACA.

Better Care Reconciliation Act v2.0

The revised BCRA makes several modifications to the prior version of the bill. Its intention is to sway wary conservatives who initially withheld their support while maintaining certain provisions to assuage more moderate concerns:

• Maintaining ACA Taxes: This bill would maintain the ACA’s taxes on investment income, health insurance executives, and Medicare health insurance. These taxes would have been repealed by the prior version.
• Increased Funding for Opioid Crisis: The new version increases the appropriation of funds for combating opioid abuse from $2 billion to $45 billion.
• The Cruz Amendment: Insurers would be able to offer plans off-exchange that do not adhere to ACA regulations as long as they offer a plan on the individual insurance exchanges that qualifies with all ACA regulations. A $70 billion fund would offset costs for insurers who take on “high risk” individuals on off-exchange plans.
• Use of Tax Credits on Catastrophic Plans: The ACA prohibited the use of tax credits by those with catastrophic coverage plans. This bill would allow those with catastrophic coverage plans to take advantage of premium tax credits.
• Increased Funding for State Stability Fund: The original BCRA allotted $112 billion for a fund distributed to states with the goal of bringing down premiums and lowering overall costs for insurers and consumers. The new version adds another $70 billion on top of this sum.
• Decreased HSA Restrictions: Under this plan, individuals may use Health Savings Accounts to pay insurance premiums.

Impact to Reporting: Although — like the previous version — this bill would nullify the employer and individual mandate marketplace penalties, it would not have any effect on employer reporting under IRC §§ 6055 and 6056. In its current form, it would not eliminate either of these reporting requirements on 1094/1095 series forms.

The Cruz Amendment does have the potential to impact minimum essential coverage reporting in the indeterminate future. By permitting off-exchange plans that are not compliant with ACA regulations, the IRS could possibly relax these reporting obligations to ease the burdens on providers of basic catastrophic coverage plans. However,eliminating this reporting requirement would require an additional act of Congress and IRS executive action to relieve providers from these reporting obligations. Congress is not currently considering any such plan.

Because this bill maintains the current premium tax credits, the IRS will maintain the employer information reporting regime to properly administer the credits for individuals whose employers do not offer plans.

The Graham-Cassidy Plan

Senators Lindsey Graham and Bill Cassidy have opted to present a different approach that consists of four key provisions:

•       Keep all ACA taxes (except for the medical device tax) in place, but funnel the revenue to the states as block grants to administer Medicaid and healthcare exchanges.
•       Eliminate the individual and employer mandate penalties.
•       Include “inflators” – allowing states that provide quality, affordable healthcare meeting federal standards to keep the federal dollars they save by doing so.
•       Ban the denial of coverage for pre-existing conditions.

Impact to Reporting: Although in the early stages of drafting, this plan would likely keep all current reporting requirements in place for the foreseeable future, while creating the potential for new state-level reporting requirements due to the devolution of authority to state governments.

Next Steps and Likelihood of Moving Forward

CBO analyses of both the BCRA and the Graham-Cassidy Plan are expected sometime later this week. Once those analyses are released, the Senate is poised to take a procedural vote on whether or not to bring either of these bills up for debate and a substantive vote. If Republicans do not have at least 50 committed “yes” votes on either measure, they will likely table the bills at that stage. In the event that, after debate and amendments, a bill does pass the Senate, it will go to conference committee to be reconciled with the House healthcare bill before being enrolled to the President.

As of today, it appears the BCRA may still lack the votes needed to pass, with Senators Paul and Collins remaining solid “no” votes and four others leaning toward voting against it. Although they offered a bill of their own, Senators Graham and Cassidy have indicated they will vote for the procedural measure, but are reserving opinions on the substance of the bill until after the CBO report. A number of other moderates, who initially withheld support, have signaled that they too will decide on the measure after the CBO analysis.

If Senate leadership can sway those who are currently on the fence, assuming no additional Senators withdraw support following the CBO report, the measure will likely reach the Senate floor for debate and a vote. The procedural vote was originally scheduled to be held this week. However, Senator McConnell decided to delay this initial vote until Senator McCain returns from a health-related absence, underscoring the fact that Republicans have no votes to spare.

We will continue to provide updates on this developing situation at each step of the process, analyzing any potential modifications to the legislation that would impact reporting, as well as its likelihood of becoming law.

Further Reading

New York Times: Senate Republicans Unveil New Health Bill, but Divisions Remain

NPR: Senate Health Care Bill Revisions Released In Attempt To Appease GOP Critics

Health Affairs: In Senate Health Care Bill, A Few Hidden Surprises

Washington Post: Revised Senate Health-Care Bill Still Lacks Votes to Pass

The Hill: Senate Republicans unveil revised healthcare bill