By Caitlin Bronson
Earlier this month, House Republicans were basking in the glow of finally fulfilling one of their long-time campaign promises. The passage of the American Health Care Act (AHCA) represents the first step toward repealing and replacing the Affordable Care Act (ACA) and changing the nation’s health care landscape once again.
Now that the dust has settled, insurance agents and brokers have an opportunity to consider how the legislation could impact the market.
The official Congressional Budget Office (CBO) assessment of the bill is still in development, but it’s possible to make some preliminary conclusions.
What’s in the AHCA?
The AHCA is a budget reconciliation bill that alters or repeals several tenets of the ACA, while preserving others.
Continuing under the AHCA is the ACA’s ban on lifetime and annual limits, guaranteed issue and renewable coverage, and continued coverage for adult children up to age 26. The bill also preserves some age-rating restrictions, requirements to cover pre-existing conditions, and the prohibition on health status underwriting.
On the chopping block are the employer and individual mandates, several ACA taxes, and federal subsidies to low-income individuals. Instead, the AHCA is imposing a 1-year, 30 percent late-enrollment fee to the premium of any enrollee with a significant lapse in coverage. The bill also provides a tax credit instead of subsidies, for which more Americans would be eligible, and boosts health savings accounts (HSAs) with increased contribution limits and other enhancements.
Finally, the AHCA allows individual states to apply for waivers to set their own essential health benefits and frees insurers to charge more based on age and health status in select cases.
- A healthier marketplace could mean a return of broker commissions
Despite heavy lobbying from industry groups, the AHCA does not remove broker commission from the ACA’s medical loss ratio.
However, there may be another avenue by which commissions become healthier.
The AHCA aims to strengthen the market by enticing younger, healthier people to purchase coverage and directing sicker enrollees to state and federal high-risk pools. If the reforms are successful and the market stabilizes, more robust broker commissions may follow.
- Alternative employee benefits solutions could rise in popularity
Although the CBO has yet to release a report on the revised version of the AHCA, it did issue its assessment on the first iteration of the bill in March. If the AHCA becomes law, the CBO estimated, 2 million fewer Americans will have employer-sponsored coverage in 2020. By 2027, that number is expected to grow to 7 million.
The CBO’s estimate assumes that — with the employer mandate gone and tax credits available to more people — dropping job-based coverage will be more appealing.
But businesses must offer some form of benefit to continue attracting and retaining employees. Less enamored of traditional group health policies, these firms will turn to alternatives like defined benefits programs or consumer-defined health plans (CDHPs).
Solutions such as the new Small Business Health Reimbursement Arrangement (HRA) look particularly likely to thrive, as tax credits become more widely available and companies seek to offload the burden of health insurance administration, said Josiah Allis, president and cofounder of Design Health in Englewood, Colo.
“I think there’s tremendous opportunity for brokers who want to embrace change and deliver value to small business owners,” Allis said. “Businesses are looking for consumer choice — they want to allow their employees to find plans that are best for themselves and their families. And they don’t want to be in the business of [administering] health insurance. So, there are a lot of reasons to look at the individual market.”
- Teaming HRAs or HDHPs with HSAs could become more attractive
The AHCA includes provisions to encourage the use of HSAs, making them a more attractive offering for both individuals and businesses looking to provide benefits.
The bill increases the maximum HSA contribution to $3,400 for self-only coverage and $6,750 for family coverage in 2017. The 2018 limits would rise to at least $6,550 and $13,100, respectively.
Additionally, both spouses could make catch-up contributions to the same HSA, and HSA funds could cover expenses the day the accompanying high-deductible health plan (HDHP) went into effect.
“The emphasis on HSAs is a very positive thing,” Allis said. “It makes consumers smarter and more efficient in how they handle medical expenses, and there’s more incentive for consumers to pair up their health plan with an HSA.”
Given the likely rise in popularity of HRAs, it’s also probable that an increasing number of small businesses will seek to coordinate their HRA with an HSA.
The AHCA isn’t law yet. What’s more, communications from Senate Republicans indicate the bill would need to undergo significant alterations before the chamber would pass it.
Regardless, any health care bill out of the Republican-controlled Congress is likely to alter the landscape for health insurance brokers.
For those working in employee benefits in particular, the AHCA is likely to be a significant turning point — one that could open up new opportunities in alternative insurance options.
Caitlin Bronson is the content writer for Zane Benefits, an employee benefits solution for small businesses. A professional communicator in the insurance space, she has worked with brokers, agencies, and financial advisors to navigate health care reform and other policy changes. Caitlin may be contacted at email@example.com.