The document summarizes the new administration's plans and debates around repealing and replacing the Affordable Care Act (ACA). Key points include: Republicans want a quick repeal but some caution slowing the process to avoid harming Americans. There are disagreements around refundable tax credits and capping the employee health coverage exclusion. The proposed American Health Care Act would keep some ACA subsidies temporarily and introduce a new tax credit system starting in 2020. Repealing most ACA taxes would reduce revenues by around $600 billion over 10 years. The process of repeal and replace will involve House committees and floor votes before moving to the Senate.
2. 1
“I would be shocked if we didn’t move forward and keep our commitment to the
American people”
Senate Majority Leader Mitch McConnell (R-KY), November 2016
“I want to have a repeal as quickly as we can get it done. Day one would be nice
for me.”
Florida Gov. Rick Scott, December 2016
“The first bill we’re going to be working on is our Obamacare legislation….We have
to bring relief as fast as possible to people who are struggling under Obamacare”.
Speaker Paul Ryan (R-MI), December 2016
President Trump “is prepared and ready to go. As he’s said before, he wants real
change on day one. That will mean within hours of being sworn in.”
Sean Spicer, January 4, 2017
Repeal Obamacare Now!
3. 2
Some Caution and Reassurances….
“We are not going to rip health care away from Americans”
Ways and Means Chairman Kevin Brady (R-TX), December 2016
“I imagine this will take several years to completely make that sort of
transition – to make sure we do no harm”
Senate HELP Committee Chairman Lamar Alexander (R-TX), November 2016
4. 3
Some Disagreements
“Republicans want to repeal Obamacare’s expensive and rigid system of
subsidies and replace them with a simple and flexible, advanceable and
refundable tax credit to help Americans who do not receive insurance
through their employer or a government program.”
House Republican Obamacare Repeal and Replace Policy Brief and Resources
2017
“I think that hard-line conservatives will come out, I would say, near
unanimously against the idea of a refundable tax credit.”
Rep. Mark Sanford (R-SC), a member of the Freedom Caucus
5. 4
Taxing Employees on Health Coverage
“I don’t believe we ought to tax health care. I’ve never been for it… I was
opposed to the Obamacare tax, so I’d be opposed to any Cadillac tax.
Would I be for a Republican Cadillac tax but against a Democrat Cadillac
tax? I don’t think so.“
House Rules Committee Chairman Pete Sessions (R-TX)
Is a cap on the employee exclusion a tax on the middle class? “I don’t see
it that way”.
Ways and Means Committee Chairman Kevin Brady (R-TX)
6. 5
Medicaid
Under our proposal, Obamacare’s Medicaid expansion for able-bodied
adult enrollees would be repealed in its current form.
House Republican Obamacare Repeal and Replace Policy Brief and Resources
2017
“As long as Alaska wants to keep the [Medicaid] expansion it should have
the option. I will not vote to repeal it.”
Senator Lisa Murkowski (R-AL)
9. 8
Key Objectives of ACA Repeal/Replace
Federal Regulation
Federal Budget Impact
State Oversight
But, preemption?
Individual Responsibility
Taxes and Fees
But, tax employees?
Job-Based Health Coverage
10. 9
American Health Care Act
House Budget Reconciliation Provisions to Repeal/Replace
ACA
ACA premium subsidies kept through 2019, with some
changes
New health coverage tax credit replaces the ACA premium
subsidies starting in 2020
Keeps most ACA market reforms in place
Repeals most ACA taxes and fees
Expands HSAs
Medicaid cuts and revisions
11. 10
Tax Repeal
Individual, employer mandates reduced to zero (1/1/2016) (Continuous cov. penalty)
Small business tax credit (1/1/2020) N/A to plans with abortion coverage in 2019
“Cadillac Tax” (delayed until 2025)
Prohibition on reimbursements of OTC medicines w/o a prescription (1/1/18)
Limitation on salary contributions to health FSAs (1/1/2018)
Increase in threshold for medical expense deduction (1/1/2018)
0.9% additional Medicare tax for incomes above $200,000/$250,000 (1/1/2018)
Net investment income tax (1/1/2018)
Medical device tax (1/1/2018, tax already suspended for 2016 and 2017)
Tax on manufacturers of branded prescription drugs (1/1/2018)
Tax on health insurance providers (1/1/2018, tax already suspended for 2017)
Denial of deduction for expenses relating to Medicare Part D subsidy (1/1/2018)
Limitation on the deductibility of health insurer executive pay (1/1/2018)
Tanning tax (1/1/2018)
12. 11
Repeal of Taxes – Official Estimates (Joint Committee on Taxation)
Provision Revenue Impact (2017-2026)
Repeal 3.8% Net Investment Tax -$158 billion
Repeal Health Insurer Tax -$145 billion
Repeal 0.9% Additional Medicare Tax -$117 billion
Delay Cadillac Plan Tax to 2025 -$49 billion
Repeal Increase in AGI Threshold for Medical Deduction -$35 billion
Repeal Fee on Branded Prescription Drugs -$25 billion
Repeal Medical Device Tax -$20 billion
Repeal FSA Contribution Limit -$19 billion
Repeal Other -$8 billion
Repeal Total -$576 billion
HSA Expansion -$19 billion
Total -$595 billion
13. 12
Cap on Employee Exclusion
40% Excise Tax
(Delayed until 2025)
Proposed Cap on Employee Exclusion
(Dropped – for now….)
$10,800 self-only; $29,100 family
(CBO estimates for tax for 2020)
90th percentile of premiums; CBO says
75th percentile $9,520/$23,860
CPI-U (2020 forward) CPI-U plus 2%
Total cost included in tax base Same
HSA contributions included HSA contributions excluded
FSA contributions included Same, but could change (possible
interaction with elimination of cap)
Payroll tax issues
Insurer/employer legally liable for any
tax
Employees liable for any tax
14. 13
HSA Expansion: Hatch-Paulsen/House Recon
Contributions increased to OOP limit (including deductibles)* Eff. 2018
• Limit for 2017 -- $3,400 self/$6,750 family
• OOP limit for 2017 -- $6,550 self/$13,000 family
• Both spouses can make catch-up contributions to same account*
HSA qualified family coverage may include embedded deductible for each
individual of at least minimum individual deductible ($1,300 self for 2017)
Eligibility for HSAs expanded
• Direct primary care service agreement
• On-site medical clinics
• Medicare beneficiaries
Distributions -- HSA-qualified insurance may be purchased from account
• Tax on non-medical expenses reduced back to 10%*
• Pre-paid primary care services
• Exercise equipment and gym memberships
• Certain nutritional and dietary supplements
• Eliminate “trap for the unwary” based on when HSA established*
15. 14
Market Reforms
Modify permitted age rating variation from 3/1 to
5/1
Effective in 2018, as implemented by HHS regulations
States may provide for a different variation
Metal Tier Requirements Repealed, effective 2020
Other requirements generally not affected
OOP max, no pre-ex exclusions, preventive care, etc.
16. 15
Continuous Coverage Incentive/Penalty
With repeal of individual mandate, how to address adverse
selection
Medicare-like penalty
In small group and individual market, insurers “shall” impose a
penalty of 30% of the otherwise applicable premium for
failure to prove continuous coverage
Applies if there is a gap of 63 days or more in the last 12
months
Penalty applies for one year
Generally starting in 2019, also applies to special enrollment
periods in 2018
17. 16
New Tax Credit to Replace ACA Credits
ACA tax credit to remain temporarily – until 2020
New credit for individual market coverage and unsubsidized COBRA
Age based (annual amounts, credit calculated monthly)
$2,000 if less than 30
$2,500 if ≥ 30 and < 40
$3,000 ≥ 40 and < 50
$3,500 ≥ 50 and < 60
$4,000 if ≥ 60
Max credit is $14,000, no more than 5 oldest people in family counted
Ex: Mom age 40; Dad age 35; 3 teenagers -- Max credit is $11,500
Income based
N/A if eligible for group health coverage, Medicare Part A, Medicaid, CHIP
Excess of credit over cost of insurance can go to HSA (if eligible)
Advanceable and refundable
N/A if abortion coverage included
18. 17
Employer Reporting
MEC reporting (Code §6055)
Current Form 1095-B for non-ALEs; Part III of 1095-C for ALEs
Not repealed, but no longer needed when individual mandate repealed
IRS “can stop enforcing reporting that is not needed for taxable
purposes,” says the Ways and Means Committee
Reporting Offers of Coverage and ALE reporting (Code §6056)
Current Form 1095-C Part II
Offer information still relevant through 2019 for current ACA premium
subsidies (even when employer penalty is repealed)
New W-2 reporting requirement relating to new health coverage credit
takes effect in 2020. Intended to replace current 6056 reporting.
W-2 Reporting of Cost of Health Coverage
Still in effect
19. 18
More Reporting
Statement from employer relating to advance payment of
new health coverage credit (starting 2020)
Statement must be provided by any working individual who seeks
advance payment of the credit
Normal penalties for failure to file information returns applies to
employers who fail to comply
Reporting for insurers relating to health coverage tax credit
New requirement under Code section 6055
20. 19
What’s Next in the Process?
Two Pieces --
House Ways and Means Committee
House Energy and Commerce Committee
House Budget Committee
House Floor
Senate – ?
President
“This bill will land on the President’s desk, he will sign it.” White House
Press Secretary Sean Spicer
21. 20
Fiduciary Rule Delay
Executive Order Issued Feb 3
Does the rule “adversely affect the ability of Americans to gain access
to retirement information and financial advice”?
Proposed Rule
Would extend April 10 “applicability date” for 60 days
Asks for comments on broader issues/economic impact
Next steps
Further delay?
Rescission of the rule?
22. 21
DOL Final Rule on State/Municipal Savings Plans
Savings Arrangements Established by States for Non-
Governmental Employees
Published in Fed Reg on Aug 30, 2016
Savings Arrangements Established by Qualified State Political
Subdivisions for Non-Governmental Employees
Published in Fed Reg on Dec 20, 2016
Disapproval resolutions under the CRA for each of these rules have
passed the House
If a rule is disapproved, the rule cannot be re-issued “in substantially
the same form” unless authorized by a subsequent law
23. 22
DOL Overtime Rule
“Defining and Delimiting the Exemptions for Executive, Administrative,
Professional, Outside Sales and Computer Employees”
Published in Fed Reg May 23, 2016
Effective December 1, 2016
Stalled in Litigation
Subject to Executive Order regarding rules not yet in effect?
24. 23
A Few Words About Tax Reform
Next big item after ACA repeal/replace
Taxing employee health benefits
Possible retirement area changes