The amended version of the American Health Care Act, which narrowly passed out of theHouse of Representatives last week, faces an uncertain fate in theSenate, where several Republicans are already airing concerns overthe bill the White House is touting as a repeal of the AffordableCare Act.

At least two Republican Senators, Rob Portman of Ohio and DeanHeller of Nevada, have said they would not vote for the bill, whileother Republicans have vowed to rework or completely rewrite the bill.

Amendments to the bill that allow states to apply for waiversfrom the ACA's essential health benefit requirements and loosen theexisting age rating requirements on insurers were enough to winover House members of the conservative Freedom Caucus, who blockedthe original version of the bill in March.

And $8 billion in additional funding to states to help cover thepremiums of higher risk consumers was added to insulate moderateRepublicans from blowback over the Congressional Budget Office'sscore of the first bill, which estimated 24 million Americans wouldlose health coverage by 2026.

The latest version of the AHCA retains provisions that kill theACA's individual and employer mandates.

When it comes to the group market, industry experts are cautioning employers from being lulledinto complacency.

“Employers need to stay the course on ACA compliance — it isstill the law of the land,” said Garrett Fenton, an attorney in theemployee benefits practice at Miller & Chevalier. “Mediaoutlets are billing this as a big victory but it's vital to keep inmind that we have a long way to go.”

In fact, the very provisions that were added to win over theFreedom Caucus in the House are likely to be targeted by SenateDemocrats committed to obstructing any effort to roll back the ACA,Fenton said.

In order to pass a version of the AHCA with a simple majority,Republican Senators will have to hew to strict budgetreconciliation rules. Under the so-called ByrdRule, legislation passed through budget reconciliation in theSenate must be directly related to federal outlays and be revenueneutral.

The tax provisions of the AHCA clearly satisfy the Byrd Rule.But the provisions to waive essential benefit and age ratingsrequirements are not directly related to the budget, but are healthcare regulations.

Ultimately, the Senate parliamentarian, Elizabeth MacDonough,will determine which aspects of the AHCA can be passed underreconciliation, and which cannot.

“She may be the most important cog in this process,” saysFenton. “The repeal bills that Republicans previously passed thatPresident Obama vetoed did not include state waivers of essentialbenefits, so it's not an issue that's been tested.”

Sen. Ted Cruz has publicly suggested that Vice President MikePence, the presiding officer in the Senate, can overrule theparliamentarian. That gambit would put the Senate in “unchartedterritory,” says Fenton.

“This can be expected to be a bumpy road, and probably a longone,” he says.

Annual, lifetime benefit waivers

The Senate is not expected to take up consideration of the AHCAuntil the Congressional Budget Office issues a new score of thebill.

Most expect substantial changes in the upper chamber, whichmakes gauging the AHCA's implications for the employer markettricky. But as written, the option to waive Obamacare's coveragerequirements could affect the benefits offered through the groupmarket, Fenton said.

The AHCA retains Obamacare's prohibition on lifetime and annuallimits for essential health benefits. Under existing law, employerscan use any state's interpretation of the ACA's 10 essentialbenefits to base group coverage.

Some states have more expansive interpretations of essentialbenefits. In granting states the option of winnowing Obamacare'sessential benefit list, large employers could base coverage on anyone state's new interpretation of essential benefits, meaning theycould place annual and lifetime limits on services like maternity,mental health, and preventative care, if those were cut asessential benefits.

“In theory, it would only take one state to use the waiver toallow any employer to impose new limits,” says Fenton. “There are alot of variables at play, but the potential for significant impactis there. Employers could use new coverage limits as a cost controlmeasure.”

Potential new taxes on health benefits?

The AHCA retains the Obamacare's Cadillac Tax, but pushes itseffective date out to 2026.

An early draft version of the AHCA stripped the Cadillac Tax andreplaced it with a 90% cap on the tax exclusion onemployer-provided health benefits. That provision met immediateblowback from employer advocates, and was promptly cut.

While the version of the AHCA sent to the Senate does notinclude new taxes on benefits, some insiders worry lawmakers mayagain be tempted to tap the option.

“I have a nagging feeling it will crop up again,” says KimBuckey, vice president of client services at DirectPath, a providerof compliance and benefits communication services to Fortune 1000companies. “The AHCA retains of lot of Obamacare's provisions, andI'm scratching my head as to where the money will come from. I'mnot sure the stake is through the heart on the idea of taxingbenefits.”

The preferential tax treatment of employer-provided healthbenefits costs the Treasury Department about $250 billion inforegone revenue annually, according to the CBO.

That sum could be needed as a source of revenue for the AHCA ifsome lawmakers move to have the Cadillac Tax stripped in theSenate.

“Funding health care is a big jenga puzzle — anytime you moveone piece you risk the whole thing coming down,”Buckey said.

House Republicans also retained the considerable boost to healthsavings accounts in the passed version of the AHCA. Tax-freecontribution limits are doubled to $6,500 for individuals and$13,100 for families, the list of qualified medical expensesexpanded, and the tax penalty on non-qualified expenses is reducedfrom 20% to 10%.

Any version of health care reform that encourages wider adoptionof HSAs will create new responsibilities for employers, Buckeysaid.

“We think it's great that the limits are expanded, but HSAsintroduce more complexity when so many workers don't understandbasic concepts of their health care coverage,” she said.

The changes for HSAs are slated to take effect in 2018. Beyondchanges to summary plan documents, employers are going to have tobe prepared for deeper investments in education initiatives if theyplan to take advantage of HSAs paired with high-deductibleplans.

“Employees are going to have to understand how the accountswork, and the complexity of funding them for the short or longterm,” Buckey said. “That should raise some red flags for employers— there would need to be a lot more communication on theirpart.”

Reporting requirements

Perhaps more than any aspect of the ACA, employers most loathed1094 and 1095 reporting requirements.

The employer mandate may be gone with the AHCA, but reportingrequirements remain.

“The AHCA interestingly doesn't do anything related to employerreporting requirements,” said Arthur Tacchino, an attorney andco-founder of SyncStream, a provider of ACA compliancesoftware.

That reality is lost on some employers. Tacchino says he knowsof some large employers that are not following up on reportingrequirements for next year, under the assumption that they won'thave to.

Whatever becomes of health care reform — Tacchino expectssubstantial changes notwithstanding the hurdles the AHCA faces inthe Senate — employers will still have reporting requirements.

“They may not be taxed but they will still have to filepaperwork,” he says. “The message we've been preaching for monthsis whatever becomes of the ACA, it is the law of the land andemployers have to be compliant for the time being and goingforward.”

And if the law changes? “There will be reporting requirements —that's been reflected in every Republican proposal to date. Whetherit's a 1095 form or a new form, employers will be tied toreporting, whether they like it or not.”

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