Republican leaders in the U.S. House of Representatives have introduced a bill intended to replace certain key provisions contained within the Affordable Care Act (commonly referred to as “Obamacare”). The Republican-sponsored legislation is named The American Health Care Act (“AHCA”). President Donald J. Trump has placed his support behind the bill.

Republicans revealed the proposed language of the AHCA to the public last week. And, late last week, the bill overcame its first major hurdle by passing through two House committees on party-line votes. The future of the AHCA, as currently written, however, remains uncertain. Most, if not all, Democrats in Congress are expected to oppose the bill. Meanwhile, Republicans are experiencing difficulties in obtaining the support of different factions of their Congressional membership. Some Republicans argue that the AHCA does not go far enough to dismantle the ACA, while other Republicans are concerned about the effects that the AHCA will have on those with lower incomes. Despite Republican control of Congress, the bill will not become law without the support of many of these Republicans.

House Republican leaders created the AHCA under the budget reconciliation process, and, therefore, its scope is limited to amending certain tax provisions in the ACA. Other aspects of the ACA would have to be amended or repealed through alternative legislative measures. Nevertheless, employers should be aware of a couple of the effects that the AHCA would have on them, if enacted:

• First, the AHCA would effectively eliminate the tax penalties on employers for failing to provide, and on individuals for failing to maintain, minimum essential coverage, as currently required under the ACA. Although the bill would not dispose of the insurance coverage requirements, without the corresponding tax penalties, they would not have their desired effects. Because the employer mandate would technically remain, employers would have to continue to follow the cumbersome ACA reporting requirements, at least for now.
• Second, the AHCA would leave the 40-percent excise tax on high-cost employer-sponsored health insurance plans in place. This excise tax is commonly referred to as the “Cadillac Tax,” and this aspect of the ACA has been of particular interest to unionized employers whose union employees have negotiated for strong health insurance coverage. Under the AHCA, the Cadillac Tax would now take effect in 2025, instead of 2020. Unlike previous iterations of the bill, however, there are no caps on tax exclusions for such plans.

The AHCA already underwent significant markup at the end of last week and will certainly experience further revisions, as other House Committees review the proposed legislation. The soonest that the AHCA could be placed before the full House is late March. The bill would then proceed to the Senate.

The U.S. Congressional Budget Office just released its report on the AHCA. According to the CBO, the AHCA would result in fewer insured Americans but would reduce the deficit and would eventually reduce insurance premiums, though not initially.