ACA Repeal - Update 1.0
The House Republican leadership unveiled on March 6, 2017 its much anticipated legislation to replace and repeal the Affordable Care Act (ACA), also referred to as Obamacare. The Congressional Republicans and President Trump had campaigned last year to repeal and replace the ACA, and this is the first step now in the legislative process.
There is a lot of information in this ACA repeal legislation, but here are a few notable tax provisions that have been proposed:
- Repeal Individual Mandate: The individual mandate in the ACA required individuals to buy insurance or incur a penalty. The proposal would repeal the individual mandate, and this repeal would be effective for the 2016 year, thus providing retroactive relief to impacted individuals.
- Eliminate Employer Mandate: The employer mandate in the ACA required certain employers to provide insurance or face a penalty. The proposal would eliminate this mandate and also make it effective after December 31, 2015. Thus, it would provide retroactive relief in 2016 to impacted employers.
- Repeal Medical Expenses Not Included in Current ACA: The ACA excluded over-the-counter medications from the definition of qualified medical expenses for health savings accounts. The proposal repeals this provision, and is effective in 2018.
- Repeal Medical Device Excise Tax: The ACA imposed a 2.3% excise tax on the sale of certain medical devices. This tax had been in effect, but Congress suspended this tax through the 2017 year. The proposal would permanently repeal this excise tax after 2017.
- Eliminate Medicare Surtax on Earned Income: The ACA imposed a 0.9% Medicare tax on wages and other earned income above certain levels. The proposal would eliminate this surtax beginning in 2018.
- Eliminate Medicare Surtax on Net Investment Income: The ACA also imposed a 3.8% Medicare tax on net investment income. This tax was imposed on individuals, trusts, and estates above certain income levels. The proposed legislation would eliminate this surtax in 2018.
- Changes to Health Savings Account Contribution Limits: The proposal would make several changes to Health Savings Accounts (HSA). The annual HSA contribution limit for 2018 would be increased to $6,550 for an individual and $13,100 for family coverage. These increased amounts would then be up to the maximum deductible and out-of-pocket amounts for HSA’s. “Catch-up” contributions to HSA’s would also be permitted beginning in 2018.
- Create a Refundable Health Insurance Credit: This proposed provision would create a refundable and “advanceable” tax credit to be used by individuals or families to purchase health insurance. The credit would be adjusted by age and income, and would be available for individuals that are not part of a government insurance plan and not covered by an employer.
The Next Steps
The legislation moves to mark-up hearings this week with the House Energy and Commerce Committee and Ways and Means Committee, and then is scheduled for evaluation with the House Budget Committee next week.
If approved by the committees, the bill would then move to the entire House for votes (near the end of March, or early April).
If passed in the House, it will go to the Senate, where it will face additional hearings and votes, and the timeline is uncertain as of now.
Below are several links to materials on this proposed legislation. Again, please remember, this is a proposal and changes can be made along the legislative process. Nothing is final yet. Sikich will keep you posted on further developments on the ACA repeal legislation, and any impact to your organization, as soon as they occur.