On November 17, the IRS published the Form that Applicable Large Employers must use to respond to IRS letters regarding proposed assessment of 2015 employer mandate taxes.  Form 14764 is a paper, mail-in “ESRP Response” that shows the receipt deadline at the top of the Form, along with a number to call to request an extension of that deadline.  On page 1, the ALE’s authorized official either accepts IRS collection of the proposed assessment or disagrees (either partly or totally).  On page 2, the ALE’s authorized representative may designate another person to provide further information to the IRS regarding the proposed assessment, but may not authorize full representation.  That must be done separately.  See Form 2848 and its Instructions.  There is no space for the ALE to indicate the grounds for its disagreement, nor is there any instruction about the format of or due date for such a submission.  Indeed, whether it may be submitted separately is not stated.

However, your IRS notice letter (Letter 226J) should include this set of instructions:

If you disagree with the proposed ESRP

• Complete, sign, and date the enclosed Form 14764, ESRP Response, and send it to us so we receive it by the Response date on the first page of this letter.

• Include a signed statement explaining why you disagree with part or all of the proposed ESRP. You may include documentation supporting your statement.

• Make sure your statement describes changes, if any, you want to make to the information reported on your Form(s) 1094-C or Forms 1095-C. Do not file a corrected Form 1094-C with the IRS to report any changes you want to make to your Form 1094-C filed for the tax year shown on the first page of this letter.

• Make changes, if any, on the Employee PTC Listing using the indicator codes in the Instructions for Forms 1094-C and 1095-C for the tax year shown on the first page of this letter. Do not file corrected Forms 1095-C with the IRS to report requested changes to the Employee PTC Listing; and

• Include your revised Employee PTC Listing, if necessary, and any additional documentation supporting your changes with your Form 14764, ESRP Response, and signed statement.

About the Form 14765, Employee PTC Listing

The Employee PTC Listing shows the name and truncated social security number of each full-time employee for whom you filed a Form 1095-C if:

• The employee was allowed a PTC on his or her individual income tax return for one or more months of the tax year shown on the first page of this letter; and

• You did not report an affordability safe harbor or other relief from the ESRP on the employee’s Form 1095-C for one or more of the months the employee was allowed a PTC.

These employees are referred to as assessable full-time employees.

Each monthly box on the Employee PTC Listing has two rows. The first row reflects the codes, if any, that were entered on line 14 and line 16 of the employee’s Form 1095-C for each month. For each employee, if the month is not highlighted, the employee is an assessable full-time employee for that month.

If the month is highlighted, the employee is not an assessable full-time employee for that month.

Employees who are not considered assessable full-time employees for all twelve months of the year (either because the employee was not allowed a PTC for any month in the calendar year or a safe harbor or other provision providing relief was reported on Form 1095-C for each month the employee was allowed a PTC) are not included on the Employee PTC Listing.

Specific instructions for making changes to the Employee PTC Listing

• If the information reported on an assessable full-time employee’s Form 1095-C was inaccurate or incomplete, you may make changes to the Employee PTC Listing using the applicable indicator codes for lines 14 and 16 that are described in the Instructions for Forms 1094-C and 1095-C. Make any changes, for each employee, as necessary, by entering new codes on the 2nd row of each monthly box.

• When making changes, first enter the indicator code for line 14 and then enter the indicator code for line 16. Separate the two codes with a slash (e.g., 1H/2A).

• If the same indicator code applies for all 12 months of the calendar year, enter that code in the “All 12 Months” column, and do not make entries for any of the months.

• If you are providing additional information about the changes for an employee, enter a check in the column titled “Additional Information Attached.” Otherwise, leave this column blank. NOTE: If more than one indicator code could apply for a month, enter only one code for that month on the Employee PTC Listing. Note any additional indicator codes that could apply for the affected employee in your signed statement. Include the employee’s name, the applicable months and the additional indicator codes for each month. We will review what you submit and will contact you.

Please ensure the signed statement and all documents submitted include the tax year and your employer ID number in the top right corner.

If we don’t hear from you

If you don’t respond by the Response date on the first page of this letter, we will send you a Notice and Demand for the ESRP that we proposed and assessed. The ESRP will be subject to IRS lien and levy enforcement actions. Interest will accrue from the date of the Notice and Demand and continue until you pay the total ESRP balance due.

To this this, you and your representative may need prompt access to your 2015 Forms 1095-C and your enrollment information for that plan year. If that data is hosted by a vendor, verify that access soon, because, just maybe, you’ve got mail.

Just days ago, “Questions and Answers on Employer Shared Responsibility Provisions Under the Affordable Care Act,” No. 57 read as follows:

Does the IRS expect to publish more information about the employer shared responsibility payment procedures?

Yes. The IRS expects to publish guidance of general applicability describing the employer shared responsibility payment procedures in the Internal Revenue Bulletin before sending any letters to ALEs regarding the 2015 calendar year.

It’s not there anymore.  On November 2, 2017 the IRS re-wrote the entire section of this FAQ set, as follows:

  1. How does an employer know that it owes an employer shared responsibility payment?

The general procedures the IRS will use to propose and assess the employer shared responsibility payment are described in Letter 226J.  The IRS plans to issue Letter 226J to an ALE if it determines that, for at least one month in the year, one or more of the ALE’s full-time employees was enrolled in a qualified health plan for which a premium tax credit was allowed (and the ALE did not qualify for an affordability safe harbor or other relief for the employee).

Letter 226J will include:

  • a brief explanation of section 4980H,
  • an employer shared responsibility payment summary table itemizing the proposed payment by month and indicating for each month if the liability is under section 4980H(a) or section 4980H(b) or neither,
  • an explanation of the employer shared responsibility payment summary table,
  • an employer shared responsibility response form, Form 14764, “ESRP Response”,
  • an employee PTC list, Form 14765, “Employee Premium Tax Credit (PTC) List” which lists, by month, the ALE’s assessable full-time employees (individuals who for at least one month in the year were full-time employees allowed a premium tax credit and for whom the ALE did not qualify for an affordability safe harbor or other relief (see instructions for Forms 1094-C and 1095-C, Line 16), and the indicator codes, if any, the ALE reported on lines 14 and 16 of each assessable full-time employee’s Form 1095-C,
  • a description of the actions the ALE should take if it agrees or disagrees with the proposed employer shared responsibility payment in Letter 226J, and
  • a description of the actions the IRS will take if the ALE does not respond timely to Letter 226J.

The response to Letter 226J will be due by the response date shown on Letter 226J, which generally will be 30 days from the date of Letter 226J.

Letter 226J will contain the name and contact information of a specific IRS employee that the ALE should contact if the ALE has questions about the letter.

  1. Does an employer that receives a Letter 226J proposing an employer shared responsibility payment have an opportunity to respond to the IRS about the proposed payment, including requesting a pre-assessment conference with the IRS Office of Appeals?

Yes.  ALEs will have an opportunity to respond to Letter 226J before any employer shared responsibility liability is assessed and notice and demand for payment is made.  Letter 226J will provide instructions for how the ALE should respond in writing, either agreeing with the proposed employer shared responsibility payment or disagreeing with part or all or the proposed amount.

If the ALE responds to Letter 226J, the IRS will acknowledge the ALE’s response to Letter 226J with an appropriate version of Letter 227 (a series of five different letters that, in general, acknowledge the ALE’s response to Letter 226J and describe further actions the ALE may need to take).  If, after receipt of Letter 227, the ALE disagrees with the proposed or revised employer shared responsibility payment, the ALE may request a pre-assessment conference with the IRS Office of Appeals.  The ALE should follow the instructions provided in Letter 227 and Publication 5, Your Appeal Rights and How To Prepare a Protest if You Don’t Agree, for requesting a conference with the IRS Office of Appeals.  A conference should be requested in writing by the response date shown on Letter 227, which generally will be 30 days from the date of Letter 227.

If the ALE does not respond to either Letter 226J or Letter 227, the IRS will assess the amount of the proposed employer shared responsibility payment and issue a notice and demand for payment, Notice CP 220J.

  1. How does an employer make an employer shared responsibility payment?

If, after correspondence between the ALE and the IRS or a conference with the IRS Office of Appeals, the IRS or IRS Office of Appeals determines that an ALE is liable for an employer shared responsibility payment, the IRS will assess the employer shared responsibility payment and issue a notice and demand for payment, Notice CP 220J. Notice CP 220J will include a summary of the employer shared responsibility payment and will reflect payments made, credits applied, and the balance due, if any.  That notice will instruct the ALE how to make payment, if any.  ALEs will not be required to include the employer shared responsibility payment on any tax return that they file or to make payment before notice and demand for payment.  For payment options, such as entering into an installment agreement, refer to Publication 594, The IRS Collection Process.

  1. When does the IRS plan to begin notifying employers of potential employer shared responsibility payments?

For the 2015 calendar year, the IRS plans to issue Letter 226J informing ALEs of their potential liability for an employer shared responsibility payment, if any, in late 2017.

For purposes of Letter 226J, the IRS determination of whether an employer may be liable for an employer shared responsibility payment and the amount of the potential payment are based on information reported to the IRS on Forms 1094-C and 1095-C and information about full-time employees of the ALE that were allowed the premium tax credit.

You didn’t notice a link to Letter 226J because there wasn’t one.  We went to “Understanding Your IRS Notice or Letter,” and used the search function for the link that we found several weeks ago.  It wasn’t there.  Letter 227 was sequestered, too. Our Google search “hit” the formerly available Notice CP220J but, alas, “Page Not Found.”  We searched the IRS Forms and Instructions page and the IRS Draft Forms and Publications page and found neither Form 14764 nor Form 14765.

Hopefully, these are transitional glitches and we will be able to tell you more when we are able to see more.  However, the big, immediate takeaway is this: the ALE Member’s response to Letter 226J will be “due” on the due date stated on Letter 226J, which probably will be only 30 days from the issuance date appearing on Letter 226J.  Subtract mailing time and internal routing time and you may have just two or three weeks to deliver to IRS your well-considered, written, well-documented, objection to a substantial employer mandate tax assessment.  If you lack ready access to well-organized data about your 2015 group health plan enrollment,  employee affordability, eligibility and IRS reporting of your coverage offers (including 2015 Forms 1094-C and 1095-C), you may find this a daunting task.  If that data is hosted by a vendor, you should contact that vendor and verify access promptly.

That’s the title of a web page that employers may find helpful upon receipt of an IRS communication asserting liability for employer mandate taxes under Code § 4980H.  It should have an official notice (“CP”) or letter (“LTR”) number on either the top or the bottom right-hand corner.  Entering that number in the search bar on the web page should display more information about the reason for the communication and what IRS expects in response.  There should also be a telephone number in the top right hand corner of the document that employers receive.

On the same web page, you’ll find a link to “Form 2848 Power of Attorney and Declaration of Representative.”  If you want another person to represent you in connection with the notice or letter, both the taxpayer and the designated representative must complete and sign the Form.  Page 1 of the Instructions for Form 2848 tells you where to mail or fax the Form.

Your designated representative need not be an attorney, if he or she is in another approved category and need not have an IRS CAF number, since a number will be issued upon receipt of the Form.  If the representative already has a nine-digit CAF number, it should be on the Form submitted.

We suspect that the initial letter will be a semi-formal precursor to Notice CP220J, which tells an employer that the IRS has “charged you an employer responsibility payment (ESRP).”   The return address on this Form is “Group 2219, 7300 Turfway Road Suite 410, Florence, KY 41042,” but no contact phone or fax number is listed. The explanatory CP220J web page is bare bones today.  We hope the IRS soon will hang some meat on it.

The Notice image posted under “Publications and Notices” (bottom of this article) is a mess; just count the contradictions.  And, we still don’t have the promised Internal Revenue Bulletin guidance about what, if anything, may precede issuance of Form CP220J.

 

Does the IRS expect to publish more information about the employer shared responsibility payment procedures?

Yes. The IRS expects to publish guidance of general applicability describing the employer shared responsibility payment procedures in the Internal Revenue Bulletin before sending any letters to ALEs regarding the 2015 calendar year.

“Questions and Answers on Employer Shared Responsibility Provisions Under the Affordable Care Act,” No. 57, updated August 26, 2017.

If the IRS intends to keep that promise, it has just eight weekly editions of the Internal Revenue Bulletin to do so, and still provide employer notices at least 60 days in advance of January 1, 2018, when the three-year limit for such tax assessments begins to be relevant.

For budgeting purposes, note that the $166.67 monthly tax under Code § 4980H(a) that accrued during 2015 has risen to $183.33 for 2017 and the $250 monthly tax under § 4980H(b) for 2015 is $282.50 for 2017.

Update:  There was no related news in the September 11, 2017 Internal Revenue Bulletin.

We don’t blame you for hearing that whenever someone warns of employer mandate taxes coming your way.  Nevertheless, we’re donning the chicken suit once again to keep you aware.  This time, we’ll keep it short and mainly quote the government.

26 U.S.C. § 4980H(d)(1) – “Any assessable payment provided by this section shall be paid upon notice and demand by the Secretary, and shall be assessed and collected in the same manner as an assessable penalty under subchapter B of chapter 68.”

Section 4980H is better known as the ACA “employer mandate.”

26 U.S.C. § 6672(b)

(b) Preliminary notice requirement

(1) In general

No penalty shall be imposed under subsection (a) unless the Secretary notifies the taxpayer in writing by mail to an address as determined under section 6212(b) or in person that the taxpayer shall be subject to an assessment of such penalty.

(2) Timing of notice

The mailing of the notice described in paragraph (1) (or, in the case of such a notice delivered in person, such delivery) shall precede any notice and demand of any penalty under subsection (a) by at least 60 days.

(3) Statute of limitations

If a notice described in paragraph (1) with respect to any penalty is mailed or delivered in person before the expiration of the period provided by section 6501 for the assessment of such penalty (determined without regard to this paragraph), the period provided by such section for the assessment of such penalty shall not expire before the later of—

(A) the date 90 days after the date on which such notice was mailed or delivered in person, or

(B) if there is a timely protest of the proposed assessment, the date 30 days after the Secretary makes a final administrative determination with respect to such protest.

Section 6051 tells you how long the IRS can wait after tax accrual to assess the tax.

26 U.S.C. § 6501(a)

Except as otherwise provided in this section, the amount of any tax imposed by this title shall be assessed within 3 years after the return was filed (whether or not such return was filed on or after the date prescribed) or, if the tax is payable by stamp, at any time after such tax became due and before the expiration of 3 years after the date on which any part of such tax was paid, and no proceeding in court without assessment for the collection of such tax shall be begun after the expiration of such period. For purposes of this chapter, the term “return” means the return required to be filed by the taxpayer (and does not include a return of any person from whom the taxpayer has received an item of income, gain, loss, deduction, or credit).

Still, there are lots of open questions about the process that will lead to an assessment, and your right to raise assessment errors.  The latest IRS guidance (below) is aging ungracefully.

Questions and Answers on Employer Shared Responsibility Provisions Under the Affordable Care Act” (April 20, 2017)

  1. When does the IRS expect to begin notifying employers that filed Forms 1094-C and 1095-C of potential employer shared responsibility payments?

The IRS expects that the letters informing ALEs that filed Forms 1094-C and 1095-C of their potential liability for an employer shared responsibility payment for the 2015 calendar year (with reporting in 2016) will be issued in 2017.

The IRS expects it will begin issuing letters informing ALEs that filed Forms 1094-C and 1095-C of their potential liability for an employer shared responsibility payment, if any, in the latter part of each calendar year in which reporting was due (for example, in late 2018 for reporting in 2018 for coverage in 2017).

  1. Does the IRS expect to publish more information about the employer shared responsibility payment procedures?

Yes. The IRS expects to publish guidance of general applicability describing the employer shared responsibility payment procedures in the Internal Revenue Bulletin before sending any letters to ALEs regarding the 2015 calendar year. In addition, the IRS expects to supplement that guidance in several different ways, widely distributing the information to ensure that ALEs are properly informed of when and how the IRS will be contacting them.

  1. How does an employer make an employer shared responsibility payment?

If it is determined that an ALE is liable for an employer shared responsibility payment after correspondence between the ALE and the IRS, the IRS will send a notice and demand for payment. That notice will instruct the ALE on how to make the payment. ALEs will not be required to include the employer shared responsibility payment on any tax return that they file.

The Internal Revenue Bulletin is published each Monday. Through Monday, August 14, 2017, no employer shared responsibility payment process guidance had been included.  Employer mandate taxes that accrued in January 2015 must be assessed by January 2018, absent an applicable exception.  The promised notices, if mailed at least 60 days in advance of January 1, 2018, must be in the mail by November 2, 2017, just eleven Mondays from now.  Keep your eyes on the skies.

As you have read here, the Senate’s finest hours were not those spent in July 26, 2017 health care policy debate, which resumed July 27 at 10:00 am EDT.  The bipartisan demagoguery did not diminish, but some Senators on each side rose above that fray and, in the end, Democrats won the narrowest possible victory in a fashion reminiscent of Auburn’s “kick six” win over Alabama.

The presiding officer noted the scheduled 2:15 pm EDT vote on the “Medicare for all” amendment offered by Senator Daines (R-Montana).  Senator McConnell (D-Kentucky) portrayed the Daines amendment as offering Democrats an opportunity to vote for a single payer system.  It didn’t sound like a peace offer; it sounded like a double-dog dare.  Silence fell for a half hour.  As our mothers told us all, “if you don’t have anything nice to say to someone, don’t say anything at all.”

Senator Carper (D-Delaware) broke the ice with a polite presentation noting broad agreement on goals of better insurance coverage of more people for less money, so that this has been, since 1993, an argument about means and methods. He then repeated and expanded on his history lesson from the prior day’s debate, which was one of that day’s few edifying performances.  In 2008, when Japan spent 8% of GDP on healthcare, we spent 18%, he said.  Acknowledging that every American can get emergency health care regardless of insurance or income, he critiqued the associated public costs and noted the cost savings achieved by widely available preventive care.  This wound up being a plea to recommit H.R. 1628 to committee for “regular order” proceedings, despite the lack of a pending motion of that nature.

Senator Schumer (D-New York) took the floor moments before 11:00 am, daring Republicans to offer a bill for final passage, even if that should be the “skinny repeal” bill rumored in the press.  However, he said, should “skinny repeal” be offered, Democrats will offer so many amendments that the extended debate on H.R. 1628 will significantly delay consideration of the National Defense Authorization Act, H.R. 2810.  Senator Schumer signaled that Democrats would not support the “Medicare for all” Daines amendment, because they regarded it as campaign bait.  Again, silence fell for a quarter hour.

Senator McCain (R-Arizona) and Senator Schumer then debated the wisdom of holding the National Defense Authorization Act hostage to the health care debate.  Senator McCain warned of the precedent of blocking a non-partisan defense bill due to dispute over a partisan bill, asking for a two hour interruption of health care debate to pass the NDAA.  Senator Schumer was unyielding in demanding that H.R. 1628 be recommitted as the price of floor action on H.R. 2810 in the foreseeable future.  After Senator McConnell declined that offer, Senators resumed health care discussion.

Senator Lamar Alexander (R-Tennessee), H.E.L.P Committee chair, explained why “repeal” and “replace” should be done in one bill. He forecast a “skinny bill” vote late in the day, conceding that any such bill will just be a vehicle to get to a House-Senate conference committee, where something more complex will be prepared for an up-or-down vote in each chamber.

Beginning around 11:35 am, Senator Peters (D-Michigan) described how insurance made available by the ACA gave a named constituent access to life-saving health care, briefly making a case for health care as a government-guaranteed right.

Senator Sanders (D-Vermont) rose at 11:45, reviving the prior day’s apocalyptic, sarcastic tone of debate, shouting that Republican proposals would cause thousands to be “thrown out of their nursing homes.” He predicted that defunding Planned Parenthood would lead to deaths of “thousands and thousands of Americans every year.”  Only the “top 1%” getting tax cuts would benefit from “throwing disabled children off of health insurance” under “this absurd Republican proposal.”  And the beat went on.  At length, Senator Sanders facetiously congratulated Senator Daines for offering a Medicare-for-all proposal and dared him to vote in favor.  Senator Sanders committed only to vote for his own Medicare-for-all proposal and thanked President Trump for admitting that Australia’s single-payer health care system is superior to ours.  Nearing the end of his time, Senator Sanders advocated federal prescription drug price controls, shamed health insurers for “outlandish” profits and CEO compensation and blamed our “bureaucratic, complicated system” of insurance on the multiplicity of insurers and policy terms.  Senator Sanders asked rhetorically whether Wall Street or drug company executives are “greedier” and personally attacked the Koch brothers for their wealth, showing enlarged photos of a $90,000,000 yacht and a billionaire’s mansion.

At 12:30 pm, Senator Moran (R-Kansas) turned the discussion to the “VA Choice” program that he said will fail within days unless new funding is authorized.  This, according to Senator Moran, is in the stack of legislation waiting for floor action after the health care debate.

Senator Flake (R-Arizona) took the floor at 12:44 pm to ask for immediate passage of H.R. 3298, to facilitate the receipt of public contributions to fund the medical expenses of officers wounded in the recent attempted assassination of Congressional Republicans.  Without objection, it was approved.

Senator Murray (D-Washington) then came to the well to decry a purported Republican plan to pass a “secret bill,” “in the dark of night,” to reach their goal “to kick tens of millions of people off their coverage,” in order to “give a massive tax break to the wealthy.”  Strong letter to follow, we supposed.

Shortly before 1:00 pm, Senator Sasse (R-Nebraska) remarked the unfortunate tendency of every dispute to become a “blood feud” and predicted that demographic and cost trends soon will force a binary choice between government rationing of entitlement medicine and a “disruptive, innovative,” “portable, affordable,” market-driven system.  Senator Sasse lamented that his choice will not be on the floor this week.  This was the Republican version of Senator Carper’s assessment – polite and perceptive.

There followed a “regular order” appeal by Senator Udall (D-New Mexico), who yielded to Senator Heinrich (D-New Mexico), who accused Republicans of a “shockingly rushed and secretive effort” to produce a “secret Trumpcare bill,” in order “to give a massive tax break to the wealthiest among us.”  Mentally ill people will lose their stabilizing medications, grandmothers will be thrown out of closing nursing homes, etc., due to “this appalling legislation.”  In closing, he referred to “real bipartisan solutions,” but identified none.

Senator Bennet (D-Colorado) picked-up on and expounded a point made by Senator Sasse: most uninsured people are uninsured only during short times between jobs, so insurance portability is key to minimizing the number of uninsured, but that is not a subject currently under discussion.  Further, he complained, the health care squabble is preventing agreement on even more pressing problems like infrastructure.  His solution: recommit H.R. 1628 to committee for regular order proceedings.

About 30 minutes before the scheduled vote on the Daines amendment, Senator Sullivan (R-Alaska) addressed the importance of “repealing, replacing and repairing” (emphasis ours) the current healthcare system, predicting that “we will probably be debating all night.”  He then denounced the National Defense Authorization Act hostage situation, noting that the NDAA won unanimous committee approval.

Well before 2:00 pm, the Senate entered a periodic hush, with few Senators on the floor, provoking a quorum call.  In four hours of debate, only Senator Sanders and Senator Sasse seemed to have taken seriously the single payer topic of the Daines amendment.  Finally, Senator Daines took the floor to explain his purpose – i.e., to focus attention on where the current system is heading without basic revision.  To do this, he copied and pasted Rep. Conyers’ (D-Michigan) entire House bill, H.R. 676, to create his H.R. 1628 amendment.  The Conyers bill, Daines said, has 115 House Democrat co-sponsors, and forbids private insurers to sell insurance policies in competition with its “Medicare for all” insurance.  Senator Daines invited Democrats to vote for his amendment or to acknowledge that they do not want to go where the current system is heading.

Another quorum call commenced at 2:18 pm, but was suspended when Senator Sanders rose again to congratulate Senator Daines again, offering to vote for the amendment if “five or six” Republicans also would vote in favor.  Otherwise, said Senator Sanders, Democrats would vote “present.”  As chuckles spread around the chamber, the Clerk began to call the roll.  No Senator voted for the Daines amendment.  All 52 Republicans plus Senators Heitkamp (D-North Dakota), King (I-Maine), Manchin (D-West Virginia), Nelson (D-Florida) and Tester (D-Montana) cast the 57  “no” votes.  The other 43 voted “present.”

At about 3:00 pm, the chair called-up the Strange (R-Alabama) amendment to block tax-funded abortion under the ACA.  However, most Senators had left the floor, none rose to speak, and so mics were muted again.  After about ten minutes, Senator Cornyn (R-Texas) resumed the debate.  Medicaid spending would rise by $71 billion over ten years under H.R. 1628, but that growth rate would be sustainable, unlike the current growth rate, he claimed.  After reciting Republican ACA talking points, Senator Cornyn yielded the floor to Senator Kennedy (R-Louisiana), who began by crediting Democrats with only good intentions when they passed the ACA.  However, he noted, doctors once bled their patients, with solely good intentions. When they learned it didn’t help, they stopped doing it.  ACA supporters are in the same situation, Senator Kennedy claimed.  He called the basic Healthcare.gov policy, “a bus ticket without a bus” and predicted days of remaining debate before a majority solution could be found.

Senator Wyden (D-Oregon) took the floor to claim that the majority’s unseen, rumored “skinny repeal” amendment was written during a just-concluded Republican lunch.  Nevertheless, he predicted severe Medicaid cuts based on a CBO score of a Democrat guess of what might be in a “skinny repeal” bill.  And, he announced a just-released Senate Parliamentarian decision that reconciliation may not be used to pass a “Trumpcare” provision permitting the states to redefine ACA “essential health benefits” and “affordability.”  Senator Wyden invited such states to seek ACA § 1332 waivers from HHS and offered Republicans “bipartisan cooperation” if reconciliation proceedings are abandoned.  Unlike prior speakers, Senator Wyden proposed a specific object of such cooperation: increasing payments to insurers to stabilize individual insurance markets.

Starting at 4:00 pm EDT, Senator Toomey (R-Pennsylvania) gave the Republican response to Senator Wyden, focusing on Medicaid’s need for reform, as part of the fiscal imperative of entitlement reform.  Medicare, Medicaid and Social Security comprise almost all of entitlement spending.  Only Medicaid has no associated, dedicated revenue stream and Medicaid is the fastest growing expenditure, growing much faster than the economy.  Senator Toomey recalled President Clinton’s proposal to cap Medicaid spending and read from Senator Murray’s 1995 letter pledging the support of all Senate Democrats.  The main difference between the 1995 proposal and today’s Republican proposal, said Senator Toomey, is that Republicans propose to impose the caps more gradually than did Senate Democrats in 1995.  Using a series of charts, Senator Toomey then critiqued the CBO scores of the BCRA and of H.R. 1628.

Senator Wyden offered, in rebuttal, to explore Medicaid cost restraint cooperation if the pending bill should be recommitted to the Finance Committee.

Up next, Senator Grassley (R-Iowa) complained of Democrat “hyperbole and fear-mongering,” designed to produce insurance market failure and adoption of single payer healthcare, he said.  Senator Grassley quoted at length from what Senator Daniel Patrick Moynihan said about the need for welfare reform in the mid-1990s, and read the dire, incorrect, predictions of those who opposed reform.  Unusually for Republican speakers thus far, Senator Grassley was as vociferous as any Democrat.

At 4:40 pm EDT, Senator Enzi (R-Wyoming) requested and received approval to hold the Strange amendment vote at 5:00 pm, with a brief interlude then to vote on unrelated H.R. 3364, before resuming debate on H.R. 1628.  Speaking to the ACA generally, Senator Enzi likened it to a 1970’s novelty gift, the Pet Rock, which had great marketing and packaging that did nothing to improve the quality of the rock but greatly increased its cost.

Beginning just minutes before the vote, Senator Strange quickly explained his proposal to extend the Hyde Amendment to ACA Exchange insurance purchase subsidies, so that, starting in 2019, 90% of such subsidies would be covered by the Hyde Amendment.  Senator Schatz (D-Hawaii) then made the expected process objection, Senator Strange requested the needed waiver, and Senators repeated the sort of supermajority vote taken on the Cruz and Heller amendments, with the same result – no waiver.

A round 6:30 pm EDT, Senator Enzi called-up Senator Heller’s amendment to repeal the excise tax on so-called “Cadillac” health insurance plans.  As usual, speakers seemed to ignore the change of tune and kept dancing their preferred dances.  Senator Blount (R-Missouri) explained his view that the individual and employer mandates are unconstitutional.  Senator Lankford (R-Oklahoma) read from constituent letters about the pain inflicted by the individual mandate and rising health care premiums and deductibles, calling the individual mandate a “poverty tax.”  He predicted no bipartisan solution because Democrats will not change or eliminate either mandate.  The “skinny repeal” idea, he said, is necessary because the CBO takes weeks to score each new proposal and can’t keep up with a wider floor amendment process.  He reminded Senators that the skinny plan does not alter pre-existing conditions protections or rules about annual limits, lifetime limits or kids on parents’ plans to age 26.

The big news of the 8:00 hour was the defeat (57-43) of Senator Schumer’s motion to recommit H.R. 1628 to the Senate H.E.L.P Committee with instructions to do something about the Cadillac plan tax.  Senator Heller (D-Nevada) then explained his amendment to kill that tax permanently, with the support of many groups normally aligned with Democrats and the ACA.  The roll call vote on his amendment consumed most of the 9:00 hour, and resulted in passage (52-48).

At 9:52 pm EDT, Senator McConnell offered a strike-all amendment dubbed the “Healthcare Freedom Act of 2017,” which had been released to the public about an hour earlier.  This was the long-awaited “skinny repeal plan.” It zeroed the individual and employer mandate taxes accrued after 2015, repealed the Medical Device Tax for three years, shifted one year of Planned Parenthood funding to community health centers, raised HSA limits and offered states $2B of funding for ACA § 1332 waiver requests and programs.  As soon as Senator McConnell finished speaking, Senator Murray (D-Washington) moved to recommit the “skinny repeal” plan to the H.E.L.P. committee, calling it “Trumpcare.”  Following that lead, Senator Murphy (D-Connecticut) called skinny repeal, “nuclear bonkers” and “health care arson,” designed to protect, “the freedom to go bankrupt” and the “freedom to die early.”

Senator Tester (D-Montana) took a more measured tone, expressing his worry about the consequences of skinny repeal for small rural hospitals.  Senator Brown (D-Ohio) then picked up where Senator Murphy had left off, accusing Senator McConnell of letting drug company and insurance company lobbyists write the amendment in his office.

Senator Manchin (D-West Virginia) renewed his plea that Senate leaders turn this policy debate over to members who had been state governors.

Senator Whitehouse (D-Rhode Island) then accused Republicans of being “beholden to a small handful of creepy billionaires,” and Senator Sanders again reviled the “absurd” process.

Senator Durbin (D-Illinois), using a copy of the amendment as a prop, cited a comment by Senator Graham (R-South Carolina) to the effect that skinny repeal is a fraud.  About 20 minutes later, Senator Kaine (D-Virginia) spoke to the same effect, with the Graham comment printed on a foam core enlargement.

Senator Booker (D-New Jersey) said that the debate had made him physically ill and warned that, “When health insurance rates go down, mortality rates go up.”

Senator Hirono (D-Hawaii) asked Republicans to show for ACA beneficiaries the same compassion that they had shown for her after her cancer diagnosis.  That exhausted the Democrats’ share of the debate time.

Senator Enzi took the floor at 11:09 pm EDT and ran out the clock on the Republicans’ allotted time, rebuffing eight attempts by Democrats to interject comments and questions.  Mostly, Senator Enzi read from and commented on the book, “Demystifying ObamaCare: How to Achieve Healthcare Reform,” by David G. Brown.  At one point of particular frustration with the interruptions, Senator Enzi reflected on former Senator Phil Graham’s warning that Democrats on healthcare “don’t care who drives the train, as long as it wrecks.”

By 12:07 am EDT, July 28, leaders had made a deal to give Democrats ten more minutes and Republicans five more minutes of rebuttal.  Senator Wyden (D-Oregon) predicted that “skinny repeal would be the gateway to full Trumpcare” and Senator Schumer promised that Democrats had “learned our lesson” and wanted to start over.  Senator Cornyn then reminisced about the partisan, secretive process Democrats used to pass the ACA and noted that the only specific cooperation offered by Democrats was to markedly raise payments to health insurers to subsidize their unsustainable losses.

The vote on Senator Murray’s motion to recommit began at 12:20 am and failed, 52-48, but there was obvious tension rising between Senator McConnell and Senator McCain.  The roll call on adoption of the “skinny repeal” amendment to H.R. 1628 began at 1:24 am EDT, with Senator McCain off the floor.  During the vote, Senator McCain re-entered and, standing near (but not facing) Senator McConnell, Senator McCain signaled his “no” vote, to a standing ovation from Democrats.  Senators Collins (R-Maine) and Murkowski (R-Alaska) also voted against the amendment, so that it failed, 51-49.

At 1:39 am EDT, Senator McConnell pulled H.R. 1628 from the floor and spoke words that communicated surrender, in a tone suggesting anything but.

In short, the ACA remains federal law to the same extent as before the November 2016 elections, except that we’re now months closer to IRS enforcement actions.

 

 

Senate floor activity has made this the ACA’s biggest news week not involving Justice Roberts, but whatever news you have read, rest assured that it wasn’t really that simple.  Let us preach on it.

Shortly after noon EDT on July 25, Senator McConnell announced a vote on a motion to proceed to debate the National Defense Authorization Act (H.R. 2810), which actually proved to be a vote on a motion to proceed to debate the House-passed American Health Care Act, H.R. 1628.  With the Vice President providing the tie-breaking vote, that motion passed and debate commenced.

Shortly thereafter, Senator Cruz (R-Texas) offered what’s been called a “skinny plan” amendment that would allow sellers of ACA-compliant plans to sell cheaper alternatives lacking some of the coverages mandated by the ACA.  However, since that amendment, standing alone, would not be filibuster-proof, Senator Cruz needed a waiver of the related budget reconciliation rules.  The motion to waive those rules needed 67 votes, but got just 43.  The roll call showed nine Republicans voting with all Democrats to deny the waiver.

Senator Donnelly (D-Indiana) then moved to send H.R. 1628 back to the Senate Finance Committee (not the Budget Committee) with Medicaid-protective instructions.  The Senate recessed until 9:30 am EDT July 26, then to resume debate, with a vote on the Donnelly motion set for 11:30 am July 26.

This would be the most edgy health care vote taken since March 2010.  Should Senator Donnelly succeed, Democrats would keep the bill alive, at the risk that committee Republicans might get their act together and come up with something that could attract 60 votes later.  Don’t laugh.  It could happen.  Old dogs can and do learn new tricks.  By defeating the motion, Republicans would tee-up a reconciliation rules vote on something yet unseen that might fall short of even 50 votes, thus wasting a one-shot, filibuster-proof process that could have been used to pass tax reform or infrastructure spending, or both.  Indeed, that specter might have motivated some of the nine votes against the Cruz amendment rules waiver.

We watched every minute of hours of persistent, partisan hyperbole that commenced as scheduled on Wednesday morning.  For clarity, consistency and calm reason, the remarks of Senator Rand Paul (R-Kentucky) stood out, except that he was lauding the bill as he would amend it, stripping all the “replace” and leaving only the “repeal.”  At 12:13 pm, Senator Mike Enzi (R-Wyoming) successfully sought to waive a quorum call and to delay the scheduled 11:30 vote until 3:30 EDT, then debate resumed.  The future of healthcare was earnestly guaranteed to be Utopian or Hellish, depending on how fellow Senators voted. Would that Mark Twain, H.L. Mencken, and P.J. O’Rourke had live-tweeted it.

At 12:50 pm, Senator Thune (R-South Dakota) hopefully forecast that keeping the bill on the floor for amendment would lead to final passage … days later.  In a lucid interval from 1:07 until 1:20 pm, Senator Donnelly tried to redirect the debate to the motion actually before the chamber but he, too, succumbed to the tragedian temptation and the next speaker (Senator Chris Van Hollen, D-Maryland) reviled the “nasty DNA” of all Republican “wealth care” proposals, urging Senators to “kill the bill, don’t kill us.”  Nothing is more common than regression to the mean.

Beginning about 2:00 pm, Senator Cornyn (R-Texas) first turned the discussion to the specifics of H.R. 1628 but then returned to the ACA’s evils, Democrat “single payer” desires and associated, asserted motives for obstruction.  Senator Shaheen (D-New Hampshire) responded with an offer of bipartisanship, in the future, with regard to some unspecified but “common sense” solution, if Republicans would first surrender their “harsh, unsustainable” ideas.  Senator Durbin (D-Illinois) made an eloquent appeal for a return to “regular order,” reading from the recent floor speech given by Sen. McCain (R-Arizona).  But, starting at the bottom of the hour, Senator Wyden (D-Oregon) raced back to the bottom, targeting President Trump and “Trumpcare.”  Not to be outdone, Senator Blumenthal (D-Connecticut) then called H.R. 1628 a “shameful, deceitful mockery of democracy,” before closing with a call for mutual respect and civility.  That took us to 2:42 pm, when your humble correspondent mumbled, semi-consciously, “Sharknado, take me now.”

Senator Johnson (R-Wisconsin) rose to offer amendments, one of which would require members of Congress to obtain ACA-compliant health insurance through ACA exchanges.  Each amendment related to the text of H.R. 1628, not to the motion being debated.  Senator Enzi took the floor again at 3:05.  He reviewed how the same partisan reconciliation process was used to pass the ACA in 2010, how many material changes were made by the prior Administration’s “executive actions,” and how premiums soon will “surge” if Congress fails to make other needed changes now. Again, nothing about Senator  Donnelly’s pending motion.  After a quarter hour of muted-mic floor silence, Senator Strange (R-Alabama) made a short plea for consensus opposition to tax-funded abortions.

Fortunately, all things must come to an end, as this seemed to do, starting with a quorum call at 3:32, followed by a roll call vote … on Senator Paul’s amendment, which was defeated, 55 – 45.  Starting at 4:14 pm, the Clerk finally called the roll for the vote on Senator Donnelly’s motion to recommit H.R. 1628 to the Finance Committee.  On that one, Republicans stuck together and prevailed, 52 – 48.  Game on.

You thought we were done for the day?  Rookie.  Seconds after the Donnelly motion’s defeat, Senator Casey (D-Pennsylvania) moved to send H.R. 1628 back to the Finance Committee with instructions to protect in the bill all those protected by the Americans with Disabilities Act, using in his speech an enlarged photo of a disabled constituent and accusing “obscene,” “repeal and decimate” Republicans of seeking to institutionalize people with disabilities.  Because, apparently, when “they” take the low road, “we” tunnel.

Senator Cassidy (R-Louisiana), like Rand Paul a physician,  ignored that bait and added a new Republican talking point: 37% of all ACA Medicaid expansion funds have been spent in just three states – California, Massachusetts and New York.  He then announced a forthcoming “Graham – Cassidy Amendment” to spread that wealth around.  In the best WWF tradition, Senator Cassidy then tagged Senator Graham (R-South Carolina), who used foam-core charts and an easel to explain that “we’re leaving the taxes on wealthier Americans in place,” in order to have the funds to convert Medicaid to state block grants boosting underfunded states without excessive cuts to overfunded states.  West Virginia, he said, would get a 43% Medicaid raise.  Montana Medicaid funding would double.   There was no ad hominem argument, no name calling – just observations and proposed solutions.  Apparently filling time, Senator Inhofe (R-Oklahoma) took the floor for a few minutes to praise President Trump and “my hero Jeff Sessions.”  Senator Enzi then announced that the next votes would be on the Heller Amendment (not yet described) and the Casey motion.

Senator Carper (D-Delaware) spoke at length on the recent history of federally-funded health care, noting that the Heritage Foundation originally conceived several solutions adopted by the ACA, including health insurance exchanges, as an alternative to the single-payer system proposed by Hillary Clinton in 1992-93.  “Romneycare” was prominently mentioned. If Republicans winced, they weren’t on camera.

After two more Democrats denounced “Trumpcare” and the vote-a-rama process, Senator Heller (R-Nevada) was recognized to tout the Heller Amendment.  However, he discussed only the desirability of Medicaid expansion protection, offering no details of his proposal.

Senator Duckworth (D-Illinois) then related a sympathetic story about a quadriplegic constituent and accused Republicans and President Trump of “threatening her life.”

Senator Casey rose again to try again to explain why ACA Medicaid expansion is needed to protect the rights created by the ADA, calling the Heller Amendment mere “sentimentality,” without any binding effect.

At 6:10 pm EDT, the Clerk began to call the roll on Senator Casey’s motion to recommit H.R. 1628 to the Finance Committee.  Republicans prevailed, 51-48, whereupon Senator Heller summarized his amendment, expressing the sense of the Senate that the bill is not intended to reduce Medicaid eligibility, benefits or coverage.  Senator Sanders (D-Vermont) interposed a procedural objection and Senator Heller sought a waiver, just as Senator Cruz had done, but won only 10 votes.

At 7:10 pm, Senator McConnell called-up an amendment proposed by Senator Daines (R-Montana).  Senator Schumer (D-New York) then announced that Democrats would offer no further amendment unless and until Republicans put on the floor a final bill offered for passage.

On the heels of that ultimatum, Senator Reed (D-Rhode Island) renewed the bipartisan cooperation offer made earlier by Senator Shaheen, then yielded the floor to Senator Franken (D-Minnesota), who decried the Republicans’ “reckless, irresponsible” plan to “gut Medicaid,” so as to deprive a named, autistic child of the “therapy he needs to thrive.”  Other examples followed.  Republican health care philosophy, he said, is “survival of the fittest.”  In closing, he urged his colleagues to “stand up to the lies.”

Following Senator Franken, we were treated to a speech by Senator Whitehouse (D-Rhode Island) on the merits of a carbon tax.

Finally, just before 8:00 pm, Senator Enzi announced that debate on H.R. 1628 would resume at 10:00 am EDT July 27, with a vote on the Daines amendment set for 2:15 pm.  Who knew health care could be so complicated?

ACA “repeal” proposals at this point seem like zombie extras – walking dead, and none of them purports to repeal employer mandate taxes that accrued in 2015. Collection is coming; only the timing is in question.

ACV 2.0 is the program designed in 2015 to enable the IRS to identify, starting in early 2017, non-compliant Applicable Large Employers.  The April 7, 2017 report of the U.S Treasury Inspector General for Tax Administration (TIGTA) included this summary of its status:

[I]mplementation of the ACV system has been delayed to May 2017. IRS management indicated that the delay is due to incorporating new requirements into ACV system development to address data inconsistencies, i.e., TY 2015 Forms 1094-C and 1095-C containing errors, missing entries, and contradictory form entries. As a result, the IRS is now having to develop an automation tool outside of the ACA system in an attempt to identify the Applicable Large Employers subject to the § 4980H(a) Employer Shared Responsibility Payment. IRS management advised us that as of January 18, 2017, the IRS was testing the automation tool that it developed and planned to deploy it by March 2017.

IRS management also explained that a lack of funding has resulted in the IRS not developing ACV capability to identify Applicable Large Employers not filing Forms 1094-C and 1095-C as required, i.e., nonfilers, or to identify the Applicable Large Employers potentially subject to the Employer Shared Responsibility Payment for offering health insurance coverage in TY 2015 that did not provide minimum value or was not affordable, i.e., § 4980H(b). Management further noted that the complexities associated with developing the programming requirements associated with the § 4980H(b) provision continue to be a challenge. As a result, IRS management indicated that they are also planning to develop an automation tool to identify nonfilers and Applicable Large Employers subject to the § 4980H(b) Employer Shared Responsibility Payment. IRS management advised us that as of January 18, 2017, the IRS is testing the automation tool that it developed and is planning to deploy it by March 2017. As part of our ongoing ACA audit coverage, we will evaluate the effectiveness of the new automation tools and eventual implementation of the ACV system.

ACV 2.0 was designed as a companion to an “ACA Case Management” system that was cancelled in June 2016 after about $7M of sunk development cost.  Cancellation was related to development of an IRS-wide Enterprise Case Management system, about which the TIGTA report said:

The ACA Case Management system functional components are being transferred to the Enterprise Case Management system. On November 4, 2016, IRS management explained that it plans to use an existing document control system to provide the needed case management capabilities, including establishing manual processes for working the Employer Shared Responsibility Payment cases, as an interim alternative until the Enterprise Case Management system can provide case management for ACA-related compliance activities. As part of our ongoing ACA audit coverage, we plan to evaluate the IRS’s efforts to implement processes to ensure Applicable Large Employer compliance with the Employer Shared Responsibility Provision and assessment of the Employer Shared Responsibility Payment.

(Emphasis ours.)  So, is ACV 2.0 ready for roll-out?  And will employer mandate tax enforcers have ECM tools, or will they be using manual processes to generate and follow-up on letters notifying suspected ALEs of suspected employer mandate non-compliance?

Many such letters may be entirely accurate and timely, but neither should be assumed by the recipient.

 

The hero has disappeared in a cloud of suspicion and is presumed dead, so much so that supposed friends are found to be celebrating his passing.  This is just as it should be at the end of Act II.  Remember when Republicans rejoiced over the apparent abandonment of H.R. 3200 in October 2009?  It furnished the foundation for H.R. 3590, which became Public Law 111-148 (one of the two statutes that comprise the ACA) in March 2010.  Capitol Hill is short on many things, but there are plenty of plot devices available to move this story forward before the elections in November 2018.  Passing the 2015 partial repeal bill again soon probably is a long shot.  But ACA subsidies may seem less sacrosanct after ACA taxes really begin to bite in early 2018, and ACA architects may rue their decision to give the HHS Secretary such wide discretion to grant § 1332 waivers.

When lawyers talk about “waivers,” we normally have in mind contracts to surrender certain legal rights in exchange for something else deemed more desirable.  Section 1332 waivers are something entirely different.  Codified as 42 U.S.C. § 18052, this ACA text empowers the Secretary to approve state plans to alter, and perhaps dispense with, these ACA provisions, for up to five years:

  • ACA § 1301-1304 (including “essential health benefits” and “qualified health plan” definitions);
  • ACA § 1311-1313 (state-operated ACA Exchanges);
  • ACA § 1402 (cost-sharing subsidies); and
  • Code § § 36B (premium subsidies), 4980H (employer mandate) and 5000A (individual mandate).

The Secretary may grant a state’s waiver request only after finding that it would achieve at least equivalent coverage and cost-sharing protections without increasing the federal deficit.  But the ACA also required the former Administration to do things that it didn’t do, and to enforce things it didn’t enforce.  Employer mandate taxes were to accrue beginning in 2014.  There was no “transition relief.”  The ACA killed so-called “grandmothered plans” outright.  Those and many other politically problematic dictates were delayed, ignored or amended administratively, sometimes very informally. We won’t be surprised if this Administration uses § 1332 waivers to allow states to “fix” perceived ACA problems that can’t or won’t be fixed by Congress.

Of course, facile findings made to facilitate waivers would provoke years of litigation ending with Supreme Court pronouncements… after November 2018 …maybe after November 2020.  So maybe we should discount that possibility.  [Insert your preferred emoji here.]

Update:  Well, that accelerated quickly.  The Senate Budget Committee web site now features a link to an 18-page draft bill called The Obamacare Repeal Reconciliation Act of 2017.  Here are highlights of what seems clear on first reading.  The bill appears to –

  • Uncap the recapture of excess premium tax credit payments;
  • Terminate at the end of 2019 the ACA’s small business tax credits, premium tax credits and cost sharing payments, while expressly authoring cost-sharing payments to be made through 2019;
  • Set the individual mandate and employer mandate taxes at $0, retroactive to January 1, 2016;
  • Defund Planned Parenthood for one year, offset by boosting Community Health Center funding by $422M;
  • Phase-out Medicaid expansion;
  • Repeal DSH payment reductions;
  • Suspend Cadillac plan taxes until 2026;
  • Repeal taxes on over-the-counter medications, repeal the prescription medicine tax, repeal the medical device tax, the tanning tax and the health insurance tax beginning January 1, 2018;
  • Repeal the net investment tax retroactive to January 1, 2017;
  • Repeal FSA contribution limits beginning January 1, 2018;
  • Authorize $1.5B of new anti-addiction spending in FY2018-19.

This is the simplest, skinniest health care “repeal” bill you are likely to read, so you should.

 

The “Discussion Draft” released June 22, 2017 by the Senate Budget Committee carries the House Bill number (H.R. 1628) of the American Health Care Act, and kills taxes like the House bill, but there are major differences, too.  At 142 pages, the Discussion Draft is less than one-sixth the heft of the ACA but it’s a brutal read.  Here are a few of the highlights that can be explained simply in this format, as we prepare for a likely vote-a-rama sometime before July 4.

It’s been re-named the “Better Care Reconciliation Act of 2017.” There’s a message in that moniker.  No Senate Republican will consider this the best they can do.  The hope is that 50 will consider it better than the status quo and therefore good enough for government work.

The premium tax credit subsidies for individual policies purchased through an ACA Exchange survive, though trimmed a bit. The household income eligibility limit drops from 400% to 350% of the federal poverty level.  If excess subsidies are paid, the feds will be allowed to recover the full amount of the excess payments and can add a 25% (up from 20%) penalty for materially incorrect credit applications. Also, the credits will be based on the premium for a “median cost benchmark plan” rather than the second lowest cost silver plan, and the new benchmark plan can have an actuarial value as low as 58%.  Similarly, it may become harder to qualify for the premium subsidy based on the high premium or low value of an employer coverage offer based on how Code § 36B affordability and value are redefined.

BCRA expressly funds ACA § 1402 cost-sharing reductions through 2019 but repeals the program at the end of that year.

Community rating survives but states may elect an age ratio as high as 5 to 1 beginning in 2020. Also starting in 2020, states may take control of medical loss ratio and rebate rules.

The small employer tax credits under Code § 45R disappear after 2019.

The individual and employer mandate taxes stay on the books but the rates and amounts are set at ZERO after 2015. This permits the IRS to assess and collect 2015 taxes.

These taxes are eliminated, with these conditions:

  • The Cadillac plan tax of Code § 4980I disappears from 2019 through 2025 but reappears in 2026;
  • The $2,500 annual FSA contribution limit ends this year;
  • The ACA § 9008 prescription drug tax also expires this year, along with the medical device tax in Code § 4191, the tanning tax of Code Chapter 49 and the health insurance tax of ACA § 9010;
  • The net investment tax is repealed retroactive to January 1, 2017;
  • The Medicare tax of Code § 3101 is cut back beginning in 2023.

HSA contribution limits will match out-of-pocket plan maximums and both spouses will be allowed to make HSA catch-up contributions.

Beginning one year after enactment, BCRA also creates a new legal entity – the fully-insured, single sponsor, multi-employer/member “Small Business Health Plan,” regulation of which is primarily federal, with broad ERISA pre-emption of state regulation. A federally-registered SBHP may issue coverage across state lines with just limited exposure to regulation by its “home” state.  However, the approved plan must forbid participating employers to fund individual market coverage for otherwise eligible employees based on the health status of those employees.

You have just read a very high-level summary of about 40% of the text of this Discussion Draft. The remaining 60% proposes significant changes to Medicaid, DSH payments and state health care program funding and administration.  Those are so complex that we’ll await an actual bill to review.