AEO compiled the details on provisions impacting small businesses in the discussion draft of the Senate’s health care bill.
Provisions Impacting Small Businesses in the Discussion Draft of the Senate’s Health Care Bill–Better Care Reconciliation Act of 2017 (BCRA)
A Glance at Key Provisions Affecting Small Business:
- Changes Age Band Ratio from 3:1 – 5:1 – Insurers cannot charge seniors more than five times what younger patients pay in premium value. Identical to the House bill.
- Small Business Tax Credits – Unlike the House bill, the BCRA does not get rid of the Small Business Tax Credit.
- Employer Mandate – Eliminates mandated coverage for employers with more than 50 employees.
- Short Term Stability – Provides a fund for states to use for lapse in coverage/short term plans.
- Long Term Stability – Provides a fund for states to use to reduce premiums for high-risk individuals.
- Delays the Cadillac Tax (40% excise tax on employer sponsored plans) until 2026
- Allows Health Savings Accounts to be used for over the counter medication
- Contribution Limit Maximum is increased
- Repeals limitations on Health Flexible Spending Arrangements
- Repeals Health Insurance Tax (tax on large insurers)
- Repeals Net Investment Tax (unearned income Medicare contribution)
- Creates Small Business Health Plans (formerly known as Association Health Plans)
Cost Sharing Subsidies for Health Exchanges
Under the Affordable Care Act (ACA), Cost Sharing Reduction Subsidies were used to lower out-of-pocket costs for enrollees, based on income, for Silver plans bought in the Health Insurance Exchanges. The BCRA would instead use tax credits based on age, income, and the actual cost of health insurance in particular markets to lower costs.
Repeals and delays the taxes imposed by the ACA, notably:
- Repeals the Small Business Tax Credit starting in 2019
- Delays the Cadillac Tax – excise tax on high-cost employer coverage – until 2026
- Repeals tax on expenditures from HSAs, Archer MSAs, flexible spending accounts, and health reimbursement arrangements for over-the-counter drugs
- Reduces the penalty on distributions for non-health care expenditures from 20% to 10% for HSAs
- Repeals the ACA’s $2,500 annual limit on tax-free contributions to flex plans
- Repeals the ACA’s tax on branded prescription drug manufacturers and importers medicine
- Repeals the ACA’s medical device tax
- Repeals the ACA’s health insurance provider fee
Small Business Health Plans (formerly known as Association Health Plans)
The BCRA creates Small Business Health Plans, which allow small businesses to purchase coverage through “sponsors” across state lines and would preempt any state law that would preclude health insurers from offering health coverage in connection with Small Business Health Plans. This varies from the ACA and the American Health Care Act (ACHA) passed by the House, although passed by the House in a prior separate bill.
Who Can Be a “Sponsor”:
- Franchisors for their franchisees
- Associations for small groups of one or more if permitted under state law
- All covered individuals would have to be active or retired owners (including self-employed individuals); officers, directors, or employees or partners of participating employers; or their dependents
Health Savings Accounts
The BCRA would increase the maximum contribution limit for HSAs from $1,000 to the amount of the deductible and out-of-pocket limit. It would allow for qualified medical expenses (like over-the-counter medication) to be paid out of an HSA, as well as allow spouses to make catch-up contributions to the same HSA.