House Republicans unveil ACA repeal, replacement bill

House Republicans on the evening of March 6 unveiled the much anticipated Patient Protection and Affordable Care Act (ACA), P.L. 111-148, repeal and replacement legislation. A markup of The American Health Care Act is scheduled in the Ways and Means Committee for Wednesday, March 8.

Taxes repealed

House Republicans, in a summary released with the bill, explained that the bill would:

(1) Dismantle ACA taxes, including taxes on prescription drugs, over-the-counter medications, health-insurance premiums, medical devices. In addition, the bill would repeal the Medicare Hospital Insurance (HI) surtax based on higher income at a rate equal to 0.9% of an employee’s wages or a self-employed individual’s self-employment income, beginning in 2018. The bill would repeal the 3.8% net investment tax, applied to higher-income individuals, estates, and trusts, starting in 2018.

W-2 reporting

(2 ) The bill calls for simplified reporting of an offer of coverage on the W-2 by employers. Reconciliation rules limit the ability of Congress to repeal the current reporting, but, when the current reporting becomes redundant and replaced by the reporting mechanism called for in the bill, then the Secretary of the Treasury can stop enforcing reporting that is not needed for taxable purposes.

Penalties eliminated

(3) Eliminate the individual and employer mandate penalties.

Age 26 insurance remains

(4) Allow dependents to continue staying on their parents’ plan until they are 26.

HSAs, FSAs and MSAs

(5) Specifically, tax-advantaged health savings accounts may help pay or be reimbursed for over-the-counter medications, effective beginning in 2018. The tax increase on HSAs would be repealed. The bill would lower the penalty rate on distributions from an HSA or Archer MSA that are not used for qualified medical expenses. The limitations on contributions to FSAs would be repealed. The $2,500 annual limitation on health FSA contributions would be repealed for tax years beginning after December 31, 2017.

The maximum contribution limit to HSAs would be increased to deductible and out-of-pocket limitations. The basic limit for HAS contributions would be at least $6,550 in the case of self-only coverage and $13,100 in the case of family coverage, beginning in 2018. Both spouses would be allowed to make catch-up contributions. Effectively, the provision would allow both spouses to make catchup contributions to one HSA, beginning in 2018. The bill includes certain circumstances under which HSA withdrawals can be used to pay qualified medical expenses incurred before the HSA was established. Starting in 2018, if an HAS is established during the 60-day period beginning on the date that an individual’s coverage under a high deductible health plan begins, then the HSA is treated as having been established on the date coverage under the high deductible health plan begins for purposes of determining if an expense incurred is a qualified medical expense. (American Health Care Act; Ways and Means Press Release: Repeal and Replace of Health-Related Tax Policy; Committee Print; House Republicans Deliver on President Trump’s Health Care Promise, March 6, 2017.)

Visit our News Library to read more news stories.