How Build Back Back Better Would Reshape U.S. Healthcare
With the Infrastructure Bill now officially signed into law, Congress will now shift its focus onto the $1.75 trillion Build Back Better proposal. In its current version, the plan could reshape U.S.healthcare and the ACA.
To start, the plan allocates roughly $130billion to expand Medicaid and reduce medical premiums for ACA coverage, according to CNBC. “It estimates premiums for around 9 million ACAplan enrollees will fall by an average of $600per year.”
The Center on Budget and Policy Priorities (CBPP) finds that “more than 2 million uninsured adults with incomes below the poverty line would be able to enroll in ACA marketplace plans beginning in January 2022 without paying any premiums.“
Build Back Better would also extend the American Rescue Plan’s Premium Tax Credit (PTC) expansion through 2025. Currently, it’s set to expire at the end of 2022and the American Family’s Plan, which aimed to make it permanent no longer seems to be on the table.
This component would be largely well-received, as PTC expansion contributed to the record-breaking ACA special enrollment period. The PTC expansion provides coverage to Americans with income up to 150% of the Federal Poverty Level (FPL) with free healthcare. Individuals at 400% of the FPL and beyond, also benefit from this as they can obtain ACA exchange coverage for no more than 8.5% of their household income.
Perhaps the greatest addition outlined in the proposal is the coverage gap for individuals in states that haven’t expanded Medicaid coverage. Build Back Better would provide $0 ACA premiums to individuals who live in the 12 holdout states that haven’t adopted the ACA’sMedicaid expansion.
After reviewing the health provisions outlined in the Build Back Better proposal, the Congressional Budget Office (CBO) projects significant changes to the spread of American healthcare over the next decade.
Specifically, the CBOestimates that the provisions would result in the following healthcare participation:
- 4.0 million increase in Medicaid enrollment
- 3.6 million increase in subsidized nongroup enrollment
- 1.0 million decrease in unsubsidized nongroup enrollment
- 2.8 million decrease in enrollment in employment-based coverage
While the Build Back Better plan does hold promise for the ACA and healthcare, it could also have some serious implications for employers.
With a drop of nearly 3 million enrollees in employer-sponsored healthcare, those individuals will turn to subsidized healthcare through a state or federal health exchange. More enrollees inACAmarketplace coverage means more PTCs.
As a reminder, PTCs are the trigger for the IRSidentifying non-compliance with the ACA’s Employer Mandate section.
Under the ACA’s Employer Mandate, employers with 50 or more full-time employees and full-time equivalent employees are Applicable Large Employers (ALEs) and must:
- Offer Minimum Essential Coverage (MEC) to at least 95% of their full-time employees (and their dependents) whereby such coverage meets Minimum Value (MV); and
- Ensure that the coverage for the full-time employee is affordable based on one of the IRS-approved methods for calculating affordability.
Failing to comply with the ACA’s Employer Mandate, and having a full-time employee obtain a PTC from a state or federal health exchange will no doubt earn you a Letter 226J penalty notice from the IRS.
And so the Build Back Better proposal may help increase access to more affordable healthcare, but employers may need to up their compliance processes to ensure they’re not offsetting the costs of subsidized healthcare through penalties.
If your organization needs assistance assessing your ACA compliance process, we recommend getting your ACA vitals to see where you currently stand regarding IRSpenalty risk. Click below to get started:
For information on ACA penalty amounts, affordability percentages, important filing deadlines, steps for responding to penalty notices, and best practices for minimizing IRS penalty risk, download the ACA 101 Toolkit.
