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House GOP Healthcare Plan Includes Tax Credits, Cadillac Delay

Posted on March 13, 2017 by Dylan F. Moroses

House Republicans unveiled healthcare legislation March 6 that would repeal several provisions of the Affordable Care Act and implement a new tax credit structure while providing further incentives for health savings accounts.

The bill would retain several ACA revenue raisers previously expected to be repealed; neither repeal of the economic substance doctrine nor a cap on the exclusion for employer-sponsored health insurance are part of the legislation. It would delay the "Cadillac tax" on high-cost health insurance plans until 2025. (Prior coverage 2017 TNT 37-5: News Stories.)

The House Ways and Means Committee plans to mark up the legislation, dubbed the American Health Care Act 2017 TNT 43-42: Proposed Legislation, on March 8.

Ways and Means Chair Kevin Brady, R-Texas, spoke on Fox News as the legislation was released to tout Republicans' desire to "deliver on President Trump's promise to repeal and replace."

"The replacement [includes] long-standing Republican policies, giving control back to the states and to the individuals as well. We are making sure this is fiscally responsible as well. So I see all the elements are there," Brady said.

But Ways and Means ranking minority member Richard E. Neal, D-Mass., denounced the legislation and the lack of transparency in its drafting in a joint statement 2017 TNT 43-52: Congressional News Releases with Rep. Frank Pallone Jr., D-N.J., ranking minority member of the Energy and Commerce Committee, which shares jurisdiction on the bill. "The Republican repeal bill would not protect patients, save money, or help working families; it is nothing but a drastic and devastating step backward," the statement said.

Beginning in 2018, the legislation would repeal the 10 percent sales tax on tanning services, the 3.8 percent tax on net investment income for high-income entities, and annual fees on pharmaceutical manufacturers and health insurers.

The legislation proposes a new age-adjusted, advanceable and refundable tax credit to purchase state-approved health insurance for qualified individuals. Individuals must not have access to government health insurance programs or employer-based coverage to qualify.

Individuals under age 30 would receive a $2,000 credit, with incremental $500 increases starting at 30 that would rise every 10 years up to a maximum credit of $4,000 for those age 60 or older. The credits could be combined for a family but capped at $14,000 per household, and would be available in full only for individuals who make up to $75,000 per year, or $150,000 for joint filers. Beyond those income levels, the credit would phase out by $100 for every $1,000 in income above the threshold.

According to a summary 2017 TNT 43-51: Congressional News Releases of the legislation, Treasury would be responsible for creating the eligibility requirements and delivery method for the credit.

The legislation would eliminate several limits on HSAs beginning in 2018, allowing spouses to make catch-up contributions and increasing the annual contribution limit to at least $6,550 for individuals and $13,100 for family coverage.

The legislation would require households that received excess premium tax credits through the ACA to repay the excess amount, regardless of income, for 2018 and 2019, and would modify the credit so that it can be used to purchase only catastrophic qualified healthcare plans, according to the summary. The bill would change the payment schedule to adjust for both household income and age of individuals or family members, and would completely repeal the ACA premium tax credits and small business health insurance tax credits beginning in 2020.

Both the individual and employer mandate penalties would be reduced to zero under the bill, which would also provide penalty relief for those affected in 2016. Over-the-counter medications would be purchasable with an HSA, and the bill would lower an ACA tax increase on HSA distributions not used for qualified medical expenses.

The legislation would also reinstate a pre-ACA tax deduction for employers who qualified for Medicare Part D subsidies beginning in 2018. The medical expense deduction threshold would revert to a 7.5 percent AGI threshold, down from 10 percent under the ACA. A Medicare Hospital Insurance surtax would be repealed beginning in 2018.