House Passes Revised Legislation to Repeal and Replace the ACA

Posted in Accounting, Audit and Tax | Healthcare on May 5, 2017

Update 3.0

On May 4, 2017, the House of Representatives passed H.R. 1628, “The American Health Care Act of 2017” (AHCA) by a narrow margin.  The bill now moves to the Senate where it faces more legislative and political challenges. 

AHCA Summary

The leadership in the House and the Administration revised the original legislation it had rolled out in March, but were forced to cancel a vote as the bill lacked sufficient Republican support (please see our earlier articles).  The Trump Administration worked with members of the House Freedom Caucus, and also with several moderate Republicans, to craft a bill that would secure enough votes to pass.  Various changes were made in the bill from the initial version unveiled in March, including how pre-existing conditions would be handled in the AHCA.  Here is a summary of the AHCA from the House Ways and Means Committee.  

Built-In Tax Provisions

A number of tax provisions were also included in the AHCA.  These tax provisions were not major sticking points in the final AHCA negotiations, but they are still important provisions that, if adopted, would impact many individuals and businesses.  Some of these tax provisions were modified from the initial legislation that was proposed and then pulled in March.  Below is a brief summary of several selected provisions in the AHCA (passed by the House on May 4, 2017):  

  • The individual mandate under the ACA is repealed effective for tax years after 2015.  Thus, this “tax/fee” would not apply for the 2016 year.
  • The employer mandate under the ACA is also repealed and this is effective for tax years after 2015.  Thus, it would not apply beginning for the 2016 year. 
  • There is a new premium tax credit for health insurance available for individuals. 
  • There are several enhancements made to Health Savings Accounts (HSA’s).
  • The itemized deduction for medical expenses for individual taxpayers is reduced from 10.0% to 5.8% of Adjusted Gross Income (AGI).
  • The .90% surtax on earned income over certain higher income thresholds is repealed. There are also some other changes for Medicare taxes.
  • The 3.8% surtax on unearned investment income will also be repealed.

Next Steps

Again, the bill now moves to the Senate where the Republicans can only afford to lose two votes and still pass the House bill, as it is unlikely the bill will receive any Democratic support.  The Senate, however, could pass a modified health care bill.  That modified bill would then need to pass in the House without any further changes; and if not, a House-Senate Conference would be needed.  Please note: the AHCA bill is not law yet.  Thus, there are more politics to play out, but look for the Senate to try and take up the AHCA legislation in the coming weeks.  Stay tuned...there is more drama to unfold.

Previous Updates:
House Announces Legislation to Repeal and Replace ACA
"Herding Elephants" - Legislation to Repeal and Replace ACA Fails in the House


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Disclaimer: This material has been prepared for general informational purposes only and is not intended to be relied upon as accounting, tax, or other professional advice. Please refer to your advisors for specific advice.