Category Archives: Uncategorized

Individual Health Insurance Mandates Being Signed into Law at the State Level

On Wednesday June 27th the New Jersey Health Insurance Market Preservation Act was signed into law. This was just the latest development in an effort for several states who are attempting to enact Mandated health insurance at the State level.

The New Jersey law in effect enforces residents, by way of penalty, to enroll in qualified health insurance. This law will be enacted on October 1, 2018 and will apply to taxable years beginning Jan 1, 2019.

It is being said that in many ways this Mandate was designed to mirror the Mandates brought forth by the Affordable Care Act (ACA). Here are a few of the similarities:

  • Annual penalty of 2.5 percent of a household’s income or a per-person charge
  • Maximum penalty based on household income will be the average yearly premium of a bronze plan in the state (rather than nation like the federal law)
  • maximum penalty based on per-person charge will be a maximum household penalty of $2,085

Reporting Guidelines

Along with this come reporting requirements. Employers will have to report qualified offers of coverage to individuals to track subsidy eligibility. The bill states that “In summary, any reporting that was acceptable under the ACA’s federal guidelines will be accepted under the New Jersey’s state reporting guidelines”.

Other States to Potentially Enact Health Insurance Mandates

Massachusetts was the first state to enact a health insurance mandate (took effect in 2006 and was a model for the health insurance mandate in the ACA).  It is still implementing this mandate.

Vermont governor, Phil Scott, signed a bill on May 28 that would establish an individual mandate. The details for the bill such as financial penalties and enforcement mechanisms will not be determined until the 2019 legislative session, which means the mandate won’t go into effect until January 1, 2020.

Maryland Democrats running for Governor have all agreed to a health insurance program that has many ACA related items. The insurance program will create a state individual mandate where the penalties imposed on individuals for not obtaining health coverage would be used as a “down payment” to obtain health insurance policies.

Other states that have discussed the possibility of a state individual mandate are; California, Connecticut, Hawaii, Minnesota, Rhode Island, Washington, and District of Columbia. Many of these states’ ability to implement an individual mandate will hinge on the results of the midterm elections this November and how many Democrats are voted into office.

It has been rumored that if these states are able to enact Healthcare Mandates they will do so with the intention of having their state laws closely mirror the infrastructure of the Affordable Care Act. Several of the states are attempting to use re-insurance coverage to take care of the expense associated with higher risk individuals. It has been reported that penalties associated with the Mandates and subsequent reporting will be used to fund these re-insurance premiums.

Overall Outlook

A few weeks ago, we published an article outlining the potential impact of the upcoming Mid-Terms as it pertains to Health Care reporting. That Article can be found here.

It seems that the Mid-Terms will take a determining role in how this all plays out. However, these laws being taken to the State level are a sign that no matter the outcome on the Federal level, there are many states who are ready to enact “ACA like” laws of their own.

The IRS is currently enforcing the Individual Mandate at the Federal level for 2018. Additionally, enforcement of the Employer Mandate continues to occur. Letter 226J is being sent out for the tax year 2015, and our sources are saying that 226J letters for 2016 are soon to follow.

Right now, may be a very good time to retroactively review your previous years filings

How will the upcoming mid-terms affect the need for Employer based healthcare reporting?


Here we are, 2018 and staring down the barrel of another upcoming election. This time will it be the Democrats who takeover control of congress? Will the Republicans maintain their stronghold and gain seats? How will the outcome of this election shape the landscape for ACA reporting going forward? The answer might not be what you think.

We’ve watched for years now as Republicans have fought to fulfill their promise of dismantling the Affordable Care act and along with it, the unpopular Employer Mandate. This mandate has required employers with 50 or more full time employees to offer certain healthcare coverage then report their offers of coverage via informational returns (1094/1095Cs) that are then supplied to employees. These reports are ultimately filed with the IRS. Failure to comply with this law can result in millions of dollars’ worth of penalties for the employer. So how can the 2018 midterm affect this?

The broad consensus that we are hearing at Sky Insurance Tech is that if Republicans gain seats and Democrats lose seats, the Employer Mandate will go away and so will the need to report coverage.

To that notion we say, “HOLD YOUR HORSES”.

This common misconception comes from the assumption that ACA Reporting is tied directly to the Employer Mandate. If the Employer Mandate goes away, so does the need to report. That would be a risky assumption. So, I will do my best to explain in the paragraphs that follow, why that thought process is totally incorrect.


First things first, what are we talking about with ACA Reporting? Why do employers have to report their offers of coverage? To be compliant with the ACA laws of course! Right, however lets really think about why this is part of the law. This is part of the law because of Subsidized health coverage.

That’s right, the reason reporting exists is because healthcare subsidies exist, and we must determine who is eligible for a subsidy and who is not. An Employers offer of affordable coverage greatly affects an individual’s subsidy eligibility. Universally granting subsidies would be catastrophic for the US budget, so we must determine who needs this assistance.

So, there’s your short answer. No matter what happens to the ACA law, if there are subsidies there will be reporting.

Here is where the rebuttal comes in, “well what if we get rid of the subsidies altogether”? Really? Do you think that is a possibility at this point? I think now is a good time to take a closer look at the numbers, then we can formulate a more educated opinion.


Based on a recent report released by the Congressional Budget Office (CBO), in an average month in 2018, about 244 million people under the age of 65 will have health insurance, and around 29 million people will not. By the year 2028 it is projected that the 29 million number will grow to around 35 million. Currently net federal subsidies for “Insured” people in 2018 total around $685 Billion. These subsidies are expected to grow to 1.2 Trillion in the year 2028. These subsidies are being used to help pay for: Medicaid, The Children’s Health Insurance Program, Medicare, and coverage obtained through the ACA Marketplace. So, at this point we must ask these questions: Can we really get rid of these subsidies? If we attempt such a thing what would be the outcome? How would this affect the American people?


According to the CBO, an average month in the year 2018 will look about like this.

  • 158 million people will be enrolled in Employment based coverage.
  • 12 million people will be eligible for Medicaid due to the expansion brought about by the ACA.
  • 49 million will be eligible for Medicaid.
  • 6 Million people in the Children’s Health Insurance Program.
  • 8 million people on subsidized healthcare coverage from the ACA marketplace.
  • 2 million people on unsubsidized coverage from the marketplace.
  • 8 million on Medicare.
  • 10 million on other coverage.
  • 29 million uninsured.

Additionally, health insurance premiums are expected to increase by about 15 percent on average between 2018 and 2019. Then they are expected to increase at a rate of around 7 percent a year between 2019 and 2028.

So where will the money come from to cover all this healthcare? Subsidies of course! I think now is a good time to mention something else. Even If the law changes, and we replace the word “subsidy” for let’s say……. the word “tax credit”, we will still be in the exact same situation.

We will have a growing demand for healthcare coverage, and a growing number of people of who cannot afford it. The strain on the US budget is enormous and growing and we must consistently track subsidy eligibly or else risk massive overspending.

There is simply no way to keep up with subsidy eligibility outside of Employer Based Reporting.


There is a short answer to this question as well, taxes and penalties.

These taxes and penalties are expected to reduce the total amount of federal subsidies for coverage by about $21 billion in 2018. Most of these will come from penalties associated with the employer mandate. The IRS is currently enacting those penalties and notifying employers through the issuance of letter 226-J.


In this article we’ve been talking about a scenario in which the Employer Mandate goes away. (A broad assumption that assumes a Republican Majority and the ability to garner the needed votes). So, in this scenario how would any of the reporting be enforced.

The reporting itself has been and will continue to be enforced by the US Code § 6721 and § 6722. Those are as follows:

26 U.S. Code § 6721 – Failure to file correct information returns

26 U.S. Code § 6722 – Failure to furnish correct payee statements

What these laws state, is that there are penalties associated with not filing correct and timely informational returns to the IRS. Additionally, there are further penalties associated with not furnishing those same returns to employees on time.

The existence of these laws does not hinge on the Employer Mandate remaining the law of the land. However, they will exist if subsidies and/or tax credits exist. These will remain enforceable as long as subsidy eligibility is something that needs to be tracked, and due to costs, they must be tracked.


At this point hopefully, you now understand why it would be incredibly difficult to remove the need for Large Employers to report their offers of health coverage. Additionally, I hope I’ve done a decent job of explaining the struggle surrounding the notion of removing billions of dollars of healthcare coverage for millions of Americans.

Can we totally remove healthcare subsidies? I don’t think we can, but you are free to decide.

Can the US afford to not regulate subsidy eligibility? I don’t think we can do this either.

Would we need to know details of the offers of coverage from employers for Subsidy eligibility? Yes.

Would that require a form of Employer Reporting similar to what we have now? Absolutely

Unfortunately, there is no crystal ball telling us about the future. Only time will tell us the outcome for certain. Based on the evidence thus far I revisit the question. How will the upcoming mid-terms affect the need for Employer based healthcare reporting? My answer, it won’t.

IRS Employer Mandate Enforcement Begins

The IRS maintains a very comprehensive Frequently Asked Questions (FAQ) document regarding ACA compliance for employers and until yesterday they had been silent regarding the enforcement of employer mandate penalties.  That now has changed, and employers should expect to begin seeing penalty letters in November and December of 2017.  These first letters will be for the enforcement of 2015 ACA penalties and will begin their efforts to audit compliance.

So with this update we now know a few things:

  • Is the IRS going to enforce the ACA employer mandate penalties?
    • Yes, beginning with the 2015 reporting submitted by employers.
  • When will they begin enforcing for the 2016 calendar year reporting for ACA?
    • We expect this to begin in the early part of 2018.
  • How will employers be notified?
    • This will be done through a letter called “Letter 226J” which will include all of the details about what penalties you will be responsible for paying.  You can learn all about ACA penalties from this link on our website.
  • What will be included in the IRS letter?
    • These letters will also include a Form 14765 which will outline in detail the month that employees received tax credits for reduced health premiums from the exchange and will therefore mean the employer will own a shared responsibility payment/penalty.

We are still helping employer with their 2015 and 2016 prior year reporting, and still accepting clients for 2017.  So please let us know if we can be of assistance.  Also you can visit the IRS updated FAQ and see all of the details from this link. 

IRS Begins Enforcing ACA Mandates

Today the IRS has issued a warning that they will begin implementing the ACA mandate penalties.  Also, they will not accept 2017 income tax returns that do not comply with the Affordable Care Act rules which require each person to disclose the type of health insurance coverage they maintained for the year.

“Obviously, this has an impact on employers.  Most employers have worked to stay compliant with the requires ACA reporting requirements, however there still are many employers … believe it or not … who have simply disregarded reporting up to this point.  With the mandates being enforced, this is going to be expensive for those who have disregarded their reporting.”

To view the IRS notification to tax professionals, click here. 

How Obamacare Repeal Failed, Then Failed Again

In the Beginning….

Last November the world watched as Republicans won the white house along with majority control of Congress. With the notion of “repeal and replace” being at the forefront of almost every Republican campaign, it seemed as if quick action toward that end was inevitable. House Speaker Paul Ryan along with Senate Majority leader Mitch McConnell (R-Ky) almost immediately began moving forward with what they were calling a “Straight Obamacare Repeal Bill”.

The aim of the bill would be simple. Repeal the Affordable Care Act (Obamacare) now, then allow for a two-year transitional period to craft a replacement. The plan seemed to be gaining momentum until Trump did an interview with CBS’s “60 Minutes”. In that interview, Trump notoriously stated that he planned on repealing and replacing the healthcare law simultaneously.
Shortly after, Paul Ryan began working with Trump to help craft a bill that would simultaneously repeal Obamacare and then provide a replacement program. What ensued were nine months of uncertainty, several failed votes and ultimately the death of Obamacare repeal attempts.

What Came Next Was Time Consuming

To avoid a Senate filibuster which would require 60 Senate votes to overcome, congress elected to use what is known as “Budget Reconciliation” in their attempts to dismantle the healthcare law. This procedure only requires a simple 51 vote majority and cannot be filibustered. Since Senate republicans held 52 seats, they could afford to lose up to two member votes on any proposed bill and still have it pass with vice president Pence available to break a tie. It all seemed inevitable given the majority numbers.

However, disagreements began to arise in Congress with regard to the repeal efforts very shortly after Trumps inauguration. House moderates debated many aspects of repeal with house conservatives and vice versa. What ensued were delays, then even more delays.

Republican momentum began to fade as February came and went. It became evident that Republicans did not have a repeal bill crafted prior to the election. It was March before a bill was finally marked up by the Committee on Ways and Means.

A House vote was scheduled for March 24th. Trump told Republican law makers “it was now or never”. On the day of the scheduled vote it became evident that Ryan did not have the votes. Ryan drove to the white house to personally inform Donald Trump that they had failed. Afterwards Ryan stated that Obamacare would be the law of the land for the foreseeable future. Trump was furious in defeat and congress left for a two-week Easter break.

The First Resurrection

Just weeks after the failed House attempt, the chairman of the conservative House Freedom Caucus declared that he was working with the moderate Tuesday Group to work out a deal.

In late April House Republicans seemed to agree on changes to the proposed bill and planned a vote for May 4th. The house passed their version of the Obamacare Repeal and Replace bill on May 4th. What ensued was a victory celebration for Trump and fellow Republicans in the White House Rose Garden. Nonetheless, the bill had only just passed the first chamber of Congress and still had some ways to go.

The Fight in the Senate

The victory in the House was followed by some bad news shortly thereafter. It seemed that many of the changes that helped win over House Conservatives, really didn’t sit well with Senate Moderates.
The first to speak up was Senator Susan Collins (R-Maine) who declared that the Senate would be “starting from scratch”. This meant they were practically throwing out the House version of the bill, and whatever the Senate would draft would then need to be reconciled again with the House. A tall order indeed.

McConnell decided to set up a working group to have hearings and conduct an open process for the American people. Notably, not a single female was assigned to the working group. This oversight became important because proposals to defund Planned Parenthood and allow states to obtain waivers with regard to maternity care, proved to be very unpopular with women. This resulted in controversy and delay.

A Senate Bill Emerges

The Senates legislation titled “the Better Care Reconciliation Act” was released on June 22nd. Many of the bills details had been kept secret and several Senators felt “out of the loop”. Days before the release of the bill, many members of Congress were still clueless as to what the bill contained.

A vote on the bill was postponed after four Senate conservatives – Sen Ted Cruz (R-Texas), Sen Rand Paul (R-Ky), Sen Mike Lee (R-Utah), and Sen Ron Johnson (R-Wis) – all criticized the bill for not dismantling the ACA enough. What followed was a mad dash by Mitch McConnell to win over skeptical conservative and moderates alike. Several amendments were made and finally the bill seemed to be at a place in which it was ready for a vote.

Can’t do it Without McCain

In July Sen John McCain (R-AZ) underwent emergency surgery to treat a brain tumor. His absence took away a key Republican senate vote. The Senate would need to wait on him to recover and return to Capitol Hill before moving forward.

In waiting for McCain’s return, Republican Senators Collins (R-Maine) and Murkowski (R-Alaska) had already publicized their opposition to the Senate bill. This left the Republicans with zero margin for error. At this point they could not afford one more Republican defection if they planned on passing a bill under reconciliation. The defections of Collins and Murkowski angered President Trump who lashed out against them over social media. In hindsight, many would say this move backfired as it only angered Murkowski giving her fuel to remain an opponent of the bill.

The proposed Better Care Reconciliation Act lost traction and it was clear that the Senate did not have the votes it needed to pass the Repeal and Replace bill. Insert plan B, make a push to vote on what was deemed the “Skinny Bill”.

The Skinny Bill was nothing more than an attempt the repeal the mandates and defund Planned Parenthood. Many in the Senate did not like the idea, but McConnell thought it was a good way to start negotiations with the House. Concerns mounted as many worried the House would just simply pass the bill “as is” to show they “accomplished” something with regard to repeal.

After days of debate, McConnell surmised he had the Senate votes and brought the bill to the floor. It was well after Mid-Night on July 27th when the voting took place. Everything seemed to be going well for the Republicans until Senator John McCain notoriously gave a thumb down to the bill on the Senate floor, thus destroying the last attempt at repeal. Shortly after, McConnell conceded defeat on the Senate floor.
It seemed as if Republicans were finally coming to terms with defeat and were ready to give up on their Repeal efforts, or so we thought.

Another Resurrection?

In September Sen Lindsey Graham (R-SC) and Sen Bill Cassidy (R-La) began gathering support for their version of a repeal bill aimed at dismantling Obamacare’s subsidy programs and Medicaid expansion.
The idea was to simply provide block grants to the states, repeal the mandates, get rid of the exchange, stop Medicaid Expansion and then let the states decide what to do.

Republicans were looking at a firm Sept 30th deadline to do all of this, as this would be the end point for their Budget Reconciliation. Week after week the bill seemed to gain steam as more and more supporters gathered around the effort.

Senator Rand Paul was among the first to come out against the bill stating that it did not do enough to repeal the ACA. Shortly after, McCain and Collins both publicly announced their opposition to the bill. On Tuesday September 26th Graham and Cassidy admitted defeat as yet another attempt at repeal fell into failure.

Moving Forward

On Friday Sep 29th, a draft of the Congress budget resolution was released. This draft did not include any specific instructions with regard to health care reform. It can be assumed this means that efforts to repeal the Affordable Care Act must now wait until 2019. However, that supposes that Congress maintains GOP majority through the 2018 mid-term elections. The Senate may be ok, but the house may be at risk.
Currently Democrats are leveraging the Obamacare repeal failures against the Republicans building up to the 2018 mid-terms. It is widely thought that future attempts to repeal the law will be wildly unpopular and difficult for the Republicans in Congress.

What this means is that The Affordable Care Act (Obamacare) remains the law of the land. It means that the Employer Mandate is staying in place, and it also means that we should expect the IRS to implement any and all penalties that pertain to ACA compliance and Reporting. For the foreseeable future, none of that is going to change.

Update on Senate Healthcare Bill


  • A new Republican Healthcare Bill is expected in the next 48 hours
  • Senators Cruz and Lee have drafted a conservative Amendment for the new Bill
  • Opposition is already growing within the Senate even before the release of new legislation
  • Senator Lindsey Graham is attempting to draft a Bipartisan bill in hopes of gaining democratic support
  • Bipartisan support may be the only way forward for new legislation


After several failed attempts to build consensus behind the proposed Healthcare Bill, the GOP controlled Senate is now making a last ditch effort to finally “Repeal and Replace” Obamacare. On Thursday of this week Senate Republican leaders plan on unveiling a “new” version of their legislation aimed at repealing the Affordable Care Act. The CBO report on this new bill is expected to be released next week.

Senate Majority Leader Mitch McConnell (R-Ky.) announced on Tuesday that they will be delaying the August recess by two weeks. He is hoping that this would give Republicans the time they need to pass new legislation.


Conservative Senators Ted Cruz (R-Texas) and Mike Lee (R-Utah) have drafted an amendment that would allow insurance carriers to sell plans that do not comply with minimum essential benefit requirements. This notion is very popular with conservatives because it would allow for premiums on certain plans to be lower. The CBO score is expected to come out on this next week, and will forecast the uninsured rate over the next ten years.


As Republican Senator John Cornyn (R-Texas) put it, “every time we get one frog in the wheelbarrow another jumps out”. New changes to the bill are expected to be met with determined opposition. Cruz and Lee have dug in their heels and have insisted on the language contained in their amendment. However other Moderate Republican Senators such as Dean Heller (R-NV), Shelly Capito (R- W.Va.), Lisa Murkowski (R-Alaska) as well as a number of other key Senators are expected to voice opposition to any conservative measures added to the proposed legislation.

This effectively means that the new bill may be “dead on arrival”.

Additionally, there is growing concern that the Cruz/Lee amendment will be used to create multiple healthcare pools which would cause a death spiral for the individual insurance markets.


Faced with the growing number of obstacles outlined above, a number of Republican Senators are beginning to talk about how coming up with a bipartisan bill may be the best route. Senator Lindsey Graham (R-SC) is now working to draft an alternate plan that he hopes will win Democratic support. Graham is expected to release more details in the next 48 hours.

The evasive 51 vote mark in the Senate has proven to be all but impossible to achieve. Many Senators are coming to the conclusion that the only way forward is to cross the aisle and work with Democrats. However, Democrats are not expected to vote for any legislation “Repealing” the ACA. Instead they would seek to ‘Fix” or “Repair” the current system. This may prove to be the best path forward for Republicans who are serious about solving the healthcare issues.

What is in the Senate Healthcare Bill?


  • Added Restrictions for Premium Tax Credits to go into effect in 2020
  • Modifications to Limitations on Premium Assistance Amounts
  • Elimination of Eligibility Exceptions For Employer Sponsored Coverage in 2020
  • Retroactive Elimination of Individual Mandate and Employer Mandate Penalties
  • Employer Reporting Requirement in place until at Least 2020
  • Funding for Cost Sharing Reduction Payments through 2019
  • Longer Phase out of Medicaid Expansion
  • Elimination of Tax Credits for plans that cover abortion
  • Repeal of all Obamacare taxes with the exception of the Cadillac Tax

The Senate released their draft version of the Obamacare repeal and replace bill on Thursday June 22nd.  The Bill is being referred to as the “Better Care Reconciliation Act of 2017” and differs in many ways from the House Bill that was passed in May of this year. Below are more details on what is contained in this Bill.

Added Restrictions to Premium Tax Credits

Under the ACA, individuals who earn a household income of 100% to 400% of the Federal Poverty Line (FPL) can be eligible for a premium tax credit. The House Bill Changes the 400% cap and lowers it to 350%. Rules are also in place to alter the eligibility of Tax Credits for aliens, changing the language from “Lawfully Present” to “Qualified Alien”. This would be affective in tax years beginning after December 31, 2019.

Modifications to Limitations of Premium Assistance Amounts

Under the ACA, Premium Assistance Amounts are determined by reference to the “applicable second lowest cost silver plan” found on the exchange. This language is being replaced by the wording “applicable median cost benchmark plan”. An “applicable median cost health plan” is the qualified health plan that is offered in the individual market in the rating area in which the taxpayer resides.

Additionally, unlike the House Bill, the Senate Bill takes into account taxpayer income along with age in their determinations of premium assistance amounts.

Elimination of Eligibility Exceptions for Employer Sponsored Coverage in 2020

Effective in tax years beginning after December 31, 2019, the House Bill removes special rules for employer sponsored Minimum Essential Coverage (MEC) under the ACA. What this means is the elimination of the 9.5% affordability requirement imposed on employer provided plans. This also removes the requirement for employer sponsored health plans to provide Minimum Value (MV).

Retroactive Elimination of Individual Mandate and Employer Mandate Penalties

Perhaps one area in which the Senate Bill mirrors the House Bill is regarding the elimination of Individual Mandate penalties along with Employer Mandate penalties. These are both effective for tax years beginning after December 31, 2015.

Employer Reporting Requirement in place until at Least 2020

Even though the Employer Mandate Penalties go to $0.00 retroactively. The ACA’s Premium Subsidies will stay in place until 2020. Eligibility for these credits will change (see above) but they will still be based on the affordability and quality of the coverage offered by employers. This means that Employers will still need to report. The reporting requirement is expected to be enforced by the “Failure to File Timely Informational Returns” penalties by the IRS.

In the same vein, employers are also still expected to track their employees FT/PT status for the purposes of reporting benefit eligibility. Employers who opt to not offer coverage because an inability to track eligibility accurately are at risk of discrimination accusations for healthcare coverage.

Funding for Cost Sharing Reduction Payments through 2019

These cost sharing reduction payments are made to the Insurers. Insurers have been in the news a lot lately pleading for money to cover ACA payments. The Senate Bill funds those payments through 2019.

Longer Phase out of Medicaid Expansion

The House Bill that was passed in May proposed an end of funding for Medicaid expansion starting in the year 2020. Moderates have been pushing very hard for a 7-year phase out. The Senate Bill puts forth a proposed phased out starting in the year 2021 with the goal of restoring funding to pre-ACA levels by the year 2024.

Elimination of Tax Credits for plans that cover abortion

This was similar to what was proposed by the House Bill. However, there is talk that this may not fit within the rules of Senate Budget Reconciliation, and may need to be removed.

Repeal of all Obamacare taxes with the exception of the Cadillac Tax

Some of the repealed/altered taxes in the Senate Bill Include: Tax on Employee Health Insurance Premiums, Tax on Over-the-Counter Medications, Tax on HSAs, Limitations on contributions to FSAs, Tax on Prescription Medication, Medical Device Tax, Chronic Care Tax, Medicare Part D Subsidy, Medicare Tax Increase, Tanning Tax and Net Investment Tax.

In addition to the items above, pg. 121 of the draft bill found here, also outlines new rules governing small business risk sharing pools.

In conclusion the Senate Bill is projected to be reviewed by the CBO and scored by Monday 6/26 at the earliest. After this the Senate hopes to bring this Bill to a vote prior to the July 4th recess.

As of the time of this writing, four Republican Senators have publicly stated objections to this Bill. This is two more than the GOP led Senate can afford assuming Vice President Pence breaks a tie in favor of the GOP.

Please stay tuned for updates.

Obamacare Repeal and Budget Reconciliation: Everything You Need To Know


  • Budget Reconciliation allows Senators to pass measures with 51 votes rather than 60
  • Provisions in the AHCA may be deemed extraneous under Senate Byrd Rule
  • ACA Reporting Requirement cannot be eliminated through reconciliation
  • The Recent CBO report spells difficulty for the Repeal effort moving forward

Recent headlines have been littered with phrases such as: “Budget Reconciliation”, “Byrd Rule”, “CBO Reports”, and “Filibuster” etc etc. What does it all mean? How does it tie together and most importantly how does this affect those working in the insurance industry?

Budget Reconciliation???

To start, let’s take a look at what budget reconciliation is. Simply put, Budget Reconciliation is a process that allows Congress to make changes more quickly than under regular rules (See Figure 1). Every year Congress is required to adopt an annual budget resolution. This serves as Congress’s statement on items such as: revenue, debt limits, and expenditures. Congress uses this to set federal spending goals for the next five years. When additional legislation that affects spending is needed beyond that which is normal, Congress can use the process known as Budget Reconciliation. Why are we talking about this? This is what Republicans in Congress are currently using in an attempt to pass new healthcare legislation in the Senate. Republican lawmakers are hoping that this can accelerate the process and lower the number of needed votes in order to pass the new law.

Why are Republicans using this to Pass Healthcare Reform???

Under normal Senate rules, there is no defined amount of time for debate on each bill. 60 Senate votes are required to end debate and move into an up or down vote on legislation. This means that any single Senator can speak on and on forever on a bill thus thwarting its ability to move forward into law. This is known as a filibuster.

Here’s the key to Budget Reconciliation. The Budget Act limits the Senate debate time on reconciliation measures to 20 hours. After 20 hours, the debate ends. This means that under budget reconciliation a total of only 51 votes are needed in order to pass measures as opposed to the standard 60 that would be needed to overcome a filibuster. If you’ve been paying attention you will know that Republicans in Congress do not currently hold 60 seats, so this is their best option for passing healthcare reform. Under Reconciliation, Republicans can pass legislation without the help of any Democrats. In addition to these limits the Senate also operates under rules that govern the subject matter of reconciliation. These limits are outlined in the Byrd Rule.

The Byrd Rule???

The Byrd Rule serves to set limits on the subject matter that can be considered under any reconciliation matter. A provision is considered extraneous if:

  • It does not produce a change in expenditures or revenues.
  • The net effect of the provisions reported by the committee fails to achieve the reconciliation instructions.
  • It is outside the instructed committee’s jurisdiction.
  • It produces changes in expenditures or revenues that are only incidental to the non-budgetary components of the provision.
  • It increases or decreases net expenditures or revenues during a fiscal year that is not covered by the reconciliation instructions.
  • It recommends changes to Social Security.

The Byrd Rule in the Media

The Byrd rule is being talked about so much in the media because some opponents of the AHCA claim that one of the key provisions of the AHCA should be considered “Extraneous” under the Byrd Rule and therefore cannot be contained in a Budget Reconciliation bill. This provision is the 30% penalty imposed on those individuals who do not maintain continuous coverage throughout the year.

Under the AHCA bill, insurance companies in certain states can charge a member 30% more for their premiums if coverage is not maintained in the previous year. Since this extra money would go to insurance companies rather than the federal government (as it does under the ACA’s individual mandate) the provision may be considered out of conformity with Senate regulations. Without the 30% provision, the AHCA falls apart as insurance risk pools become unbalanced and people wait to buy insurance until they are very sick.

Reconciliation Limits on Repealing Reporting Requirements

Additionally, a little known fact is that even though the proposed healthcare bill reduces the Individual and Employer penalties to $0, it cannot remove the requirement to report qualified offers of coverage. What this means is that budget reconciliation cannot be used to change the current reporting requirements under the ACA. Additionally, marketplace premium tax subsidies are proposed to stay in place until the year 2020 at which time they are to be replaced by less generous tax credits. Reporting will still be needed in order to track who is eligible for a subsidy and then eventually who is eligible for a tax credit. We first uncovered these details in a recent blog: House Passes AHCA Bill – What This Means for Employer Compliance.

The Congressional Budget Office and the AHCA

On May 25th, the CBO released its report on the amended AHCA bill that passed in the House. The report found that 23 million Americans could lose their health insurance by the year 2026. Before the Senate could even take a look at the bill, the CBO was required to report on it. Since there were actually budgetary savings implemented by the bill it is now free to move to the Senate, but from there it will not be an easy road.

Final Thoughts

The road ahead for healthcare repeal is a bumpy one at best. Congressional Republicans are faced with the daunting challenge of living up to their campaign promises of “Repealing and Replacing” the ACA while at the same time trying to preserve coverage rates and lower premiums. This is a challenge that may prove “undoable” and in the end lawmakers may have to compromise.

House Passes AHCA Bill – What This Means for Employer Compliance


  • AHCA bill passed in the House of Representatives
  • Senate will now take up the bill, and many have said publicly that it will have significant changes and potential poison pills added that would keep it from ever becoming law.
  • Individual and Employer mandate penalties go to $0 as of 12/31/2015.
  • ACA Reporting stays intact as is, with the addition of new additional reporting as of 1/1/2018.
  • Definition of what plan can receive a subsidy or tax credit has changed.
  • Subsidies will be replaced with tax subsidies in 2020.

On May 4, 2017 the US House passed the latest iteration of the American Healthcare Act (AHCA), a reconciliation bill aimed at repealing and replacing the ACA. The next step is for the bill to be sent to the Senate, where it is already facing harsh criticism.

The Senate is expected to take on an even slower pace as many members are saying that they need “plenty of time to look things over”. Thus far many Republican Senators have expressed concern over the substance of the new plan. Some noteworthy statements are as follows:

“We’re not under any deadline, so we are going to take our time” – Sen. John Cornyn (R-TX)

“I’m not so sure this is good civics here” – Sen. Lindsey Graham (R-SC)

“The Margin of error is a lot less over here” – Sen. John Thune (R-ND)

“Anything that makes it impossible for us to do under reconciliation we’ll have to either try to do it a different way or do it at a later time” – Sen. Roy Blunt (R-MO)

“It’s a skeleton, but it’d definitely still not the final product” – Sen James Lankford (R-OK)

Senators Lindsey Graham (R-SC), Shelley Moore-Capito (R-WV) and Johnny Isaakson (R-GA), are co-sponsoring an earlier bill that was authored by Sen. Susan Collins (R-ME) and Sen. Bill Cassidy (R-LA). This bill takes an entirely different approach than that of the house. It has language that allows states to either keep the current ACA law’s framework or opt into a new program that would enroll people into a catastrophic insurance plan that would be paid for through the use of tax credits.

The most important items that the House Freedom Caucus negotiated in order to pass the latest bill, such as the opting out of Essential Health Benefits, are possibly unallowable in Senate Reconciliation rules. This seems to be the case as all items must concern the budget and not regulation, something Dems are sure to bring up at large.

Senators Chuck Grassley (R-IA) and Roy Blunt (R-MO), think that the Senate might write its own bill from scratch and disregard the latest House bill. Additionally, unlike the house, the Senate must receive and review a score from the Congressional Budget Office (CBO) before a vote of any kind. It’s expected to take two weeks for this to occur.

At this point it is uncertain what the revised Senate bill will look like, but we do know that it will undergo an overhaul. New developments will surface on a daily basis which makes it difficult to determine exactly what this means for Employer Compliance and Reporting going forward. Assuming no changes occur to the bill (which we know they will) this is what we know so far………

  • Sec 205, 206 – Individual Mandate and Employer Mandate Penalties for offering health coverage will go to $0.00 after Dec 31, 2015. This does not address any penalties that may be incurred for the 2015 plan year prior to Dec 31, and from all accounts the IRS is planning on implementing penalties for the 2015 plan year. More on that here.
  • Sec 205, 206 – While taking the Mandate penalties to $0.00, the IRS reporting penalties associated with the filing of “Informational Returns” are assumed to stay the same. Changes to the reporting requirement for large employers are not mentioned in the bill and are also assumed to stay “as is”.
  • Sec 131 – Repeal of Subsidies. The cost sharing subsidies created by the ACA are not to be repealed until December 31, 2019 to allow for transition. The government will need to know who is eligible for a subsidy for 2017, 2018 and 2019. That means employers will need to report coverage offered. After this, ongoing reporting will still be needed to track Tax Credits.
  • Sec 202 – Additional Modification to Premium Tax Credits under ACA. This would go into effect after Dec, 31 2017 (which excludes this reporting year) and would no longer be allowable for insurance that covers abortions. These would additionally now be indexed based on “age” and “income” which would substantially decrease credits available for younger tax payers.
  • Sec 202 – Change to the definition of “Qualified Health Plan”. Qualified health plans look to exclude both MV requirements as well as indexing.
  • Sec 202 – Reporting Under Section 6055(b). New reporting for information relating to Off-Exchange Premium Credit Eligible Coverage. New requirements will be effective as of Jan 1, 2018 with regard to newer Premium Credits.

No-one yet knows when the senate will enact a new law or even what that law will look like. It may be late Summer to early Fall before we know anything. At that point changing the reporting requirement for the tax year 2017 will not be possible. So it is expected that 2017 reporting requirements will stay as they currently are. If the law passes in its current form, the mandate penalties will be eliminated, but that does not affect the penalties associated with failure to file informational returns. This affects the exchanges, the Insurance Carriers and Applicable Large Employers (ALEs).

President Trump’s ACA Executive Order

Anyone keeping up with the news recently has probably seen headlines mentioning new Executive Orders executed by President Trump. Very shortly after being sworn into office on January 20th, newly elected President Trump signed an Executive Order beginning to outline his Administrations intent to repeal the Affordable Care Act (ACA).

No-one yet knows how long the law will remain in effect. However it was made clear in the Executive Order that it is “Imperative for the executive branch to ensure that the law is being efficiently implemented”. It also stated that all executive departments should “take all actions consistent with the law to minimize the unwarranted economic and regulatory burdens of the ACA”. The order then mentions that there should be an effort to afford states more flexibility and control in order to create a more open healthcare market.

After the release of the Executive Order, many are still trying to determine what this all means. What will happen to the individual mandate? What does this mean for insurers? Will employers still have to comply with IRC section 6056? What about the exchanges? Before addressing these things it is imperative to first review some key language from the Executive Order itself.

Sec. 2. To the maximum extent permitted by law, the Secretary of Health and Human Services (Secretary) and the heads of all other executive departments and agencies (agencies) with authorities and responsibilities under the Act shall exercise all authority and discretion available to them to waive, defer, grant exemptions from, or delay the implementation of any provision or requirement of the Act that would impose a fiscal burden on any State or a cost, fee, tax, penalty, or regulatory burden on individuals, families, healthcare providers, health insurers, patients, recipients of healthcare services, purchasers of health insurance, or makers of medical devices, products, or medications.

Sec. 3. To the maximum extent permitted by law, the Secretary and the heads of all other executive departments and agencies with authorities and responsibilities under the Act, shall exercise all authority and discretion available to them to provide greater flexibility to States and cooperate with them in implementing healthcare programs.

Sec. 4. To the maximum extent permitted by law, the head of each department or agency with responsibilities relating to healthcare or health insurance shall encourage the development of a free and open market in interstate commerce for the offering of healthcare services and health insurance, with the goal of achieving and preserving maximum options for patients and consumers.

Sec. 5. To the extent that carrying out the directives in this order would require revision of regulations issued through notice-and-comment rulemaking, the heads of agencies shall comply with the Administrative Procedure Act and other applicable statutes in considering or promulgating such regulatory revisions.

The executive order may in fact first and foremost be a political play. President Trump ran an entire campaign on the promise of dismantling the healthcare law and replacing it with “Something Fantastic”!  Obviously this lays out the ground work for Tom Prince, Andrew Puzder and Steven Mnuchin, incoming HHS, Labor and treasury secretaries (Respectively).

Currently, none of these gentlemen have been confirmed by the Senate and therefor there will be some time elapse before they can take any action.

When they are in a place to take action there are still many steps that have to be taken first.  For instance if any action is to be taken regarding loosening any rules this will most likely require new proposed regulations. This in turn is followed by a review and implementation period. On top of this the Democratic Party is not planning on “playing nice”. To sum it all up any changes will inevitably take some time. These things typically take a while (possibly years) even way they are noncontroversial.

Another widely mentioned impact of the Executive order would be the issuing of blanket hardship exemptions to all who enroll in coverage. This could be another way of “loosening” the impact of the individual mandate. However while this can be done in theory it is not practical at all. Granting hardship exemptions to all would essentially implode the current healthcare exchanges as carriers must have the individual mandate in order to offset the risk taken on when enrolling those with pre-existing conditions. Again, possible but not likely.

Lastly, many are wondering what this means for the employer mandate and therefore employer reporting. So far there has been no word specifically on this. One thing is for sure, until the Treasury Department announces something different the current law of the land still stands. This means that all employers should be prepared to furnish 1095Cs to employees by early March and also plan to have these filed with the IRS by the March 31st deadline.