As the U.S. Senate considers its own version of Affordable Care Act (ACA) repeal-and-replace legislation, plan sponsor groups urged it the repeal the Cadillac tax and employer mandate outright.

“Any legislation to repeal, replace or reform the ACA must ‘first, do no harm’” to employer-sponsored health coverage, an “extremely popular and successful system that covers the vast majority of Americans,” according to a May 23 letter from James Klein, president of the American Benefits Council (ABC), to Sen. Orrin Hatch, R-UT, chairman of the Senate Finance Committee.

The Cadillac tax is widely unpopular with both parties and already “is forcing employers to shift costs to workers to avoid exceeding the ACA’s arbitrary thresholds,” Klein wrote.

The ERISA Industry Committee (ERIC) agreed. “This tax on benefits will cause benefits to degrade in quality while growing much more expensive to plan beneficiaries at the same time,” said Annette Guarisco Fildes, ERIC president and CEO, in her own letter to Hatch. “The Cadillac tax will eventually consume all health care plans, putting women, seniors, low-income families, the disabled, and traditional employers with diverse workforces at a dangerous disadvantage.”

Klein also warned against the alternative of capping the exclusion for employer-provided health benefits: “Because a cap looks at the cost of coverage rather than the actual generosity of a plan, it also suffers from many of the same flaws as the ‘Cadillac Tax,’ disproportionately affecting employer plans in high-cost locations or with older workers.”

Rather than relying on such “economic gimmicks” to lower healthcare costs, ABC maintains, legislation should address the underlying cost drivers by improving price and performance transparency and giving employers flexibility for value-based purchasing and other innovations. ERIC suggested that the Finance Committee take steps to implement value-based care and market-based strategies in public programs.

Employer Mandate

Like the Cadillac tax, the ACA employer mandate is a needless burden on employers because most would continue to offer coverage anyway, ABC continued. “Complying with burdensome tracking requirements necessitated by the mandate consumes time and resources of employers and increases the costs of providing coverage to employees,” Klein wrote. Even if Congress decides simply to eliminate the employer mandate penalty, as the House-passed version of the American Health Care Act (AHCA) does, “we urge significant simplification of the employer reporting obligations related to the offer of coverage to employees.”

The AHCA, as passed by the House May 4 (H.R. 1628), would delay the Cadillac tax from 2020 to 2026, and zero out the employer mandate penalty, without repealing either requirement outright. The goal is to get the bill through the budget “reconciliation” process so it doesn’t need a filibuster-proof majority in the Senate. ERIC suggested that AHCA legislation postpone the Cadillac tax for as long as reconciliation rules permit, and that outright repeal be introduced as a separate bill.

ABC expressed concern that the prominent role of state waivers in the House bill might undermine the uniform ERISA scheme for large self-funded employers. “States could find it politically and financially attractive to assert more control in ways that, even unintentionally, could make it impossible for multi-state employers to sponsor health coverage for their employees in a consistent manner,” Klein warned. “We urge Congress to avoid ceding further authority to the states, thereby potentially eroding ERISA’s uniformity standard.”

Expanded Use of Accounts

Both groups called for the AHCA legislation to expand the role of “consumer-driven” mechanisms like health savings accounts (HSAs), flexible spending accounts (FSAs), and health reimbursement arrangements (HRAs).

ERIC urged the committee to support the House AHCA provision that nearly doubles the annual limit on HSA contributions, and to amend the tax code to give HSA beneficiaries access to supplemental benefits. ABC called for the recently enacted Qualified Small Employer HRA program to be expanded to larger employers. Both groups support repeal of the ACA’s prohibition on HSA and FSA use for over-the-counter medications.

“Further, current rules prevent qualified high-deductible health plans from offering first-dollar coverage for certain preventative services, especially prescription drugs that can prevent dangerous episodes by keeping chronic illnesses managed,” ERIC added. “These rules should be updated to ensure that those enrolled in HSA-compatible plans can benefit from first-dollar coverage for prescription drugs and other medical products and services that are likely to prevent or reduce catastrophic episodes later.”

ABC also urges Congress to:

• Maintain the current HIPAA/ACA exemptions for certain “excepted benefits.”
• Stabilize the individual market, including reliable funding for the cost-sharing reduction subsidies.
• Continue to provide employer flexibility in designing wellness programs.
• Simplify the rules for electronic disclosure of benefits documents.
• Enact medical liability reform at the federal level.