Vetoed Obamacare repeal bill reintroduced in the Senate

Sen. Rand Paul has reintroduced a bill to repeal Obamacare, S.B. 554, the Obamacare Repeal Act. The bill vetoed by then President Obama was H.R. 3762, Restoring Americans’ Healthcare Freedom Reconciliation Act of 2015. The re-introduced bill is almost an exact duplicate with minor changes, mostly effective dates. Congressman Jim Jordan is expected to introduce companion legislation in the House. Senator Paul also introduced an Obamacare replacement bill in January, S.B. 222, Obamacare Replacement Act.

H.R. 3762/S.B. 554

Some of the provisions of H.R. 3762/S.B. 554 include:

Cadillac Tax/Form W-2 reporting repeal. The excise tax on high cost employer-provided health coverage (popularly known as the “Cadillac tax”) would not have applied after 2017 (after December 31, 2019, in S.B. 554). Note that, even though the Form W-2 provision was not included in the vetoed bill, the House Report 114-293 on H.R. 3762 included with the Cadillac repeal a provision immediately repealing the employers’ requirement to report the value of employer-provided health care on Form W-2. This is currently reported on Form W-2 in Box 12 using Code DD.

Health Savings Accounts (HSAs), Archer Medical Savings Accounts (MSAs), Health Flexible Savings Accounts (HFSAs), Health Reimbursement Arrangements (HRAs). Under the bill, HSAs, MSAs, HFSAs and HRAs could be used to pay for over-the-counter medications. The payroll connection is that contributions to some of these accounts are usually made through employee payroll deductions. This means employees may be increasing or decreasing their contributions.

HSA and MSA distribution tax. The bill would have lowered the tax on distributions from HSAs and Archer MSAs that were not used for medical expenses.

Cafeteria Plan salary reductions. Salary reduction contributions to a HFSA under a cafeteria plan (which are pre-tax deductions) would no longer have been limited.

Additional Medicare tax repeal. The additional Medicare tax on income above certain income thresholds would have been eliminated. The current tax rate is 0.9% payroll tax on wages and self-employment income. Currently, an employer must withhold Additional Medicare Tax from wages it pays to an individual in excess of $200,000 in a calendar year, without regard to the individual’s filing status or wages paid by another employer.

Employer mandate and reporting requirements. The employer mandate to offer and report on health insurance to full-time employees would be repealed. This means that information returns using the Form 1094 and Form 1095 series would no longer be necessary.

S.B. 222

Among other things, S.B. 222:

Health Savings Accounts (HSAs). Authorizes a tax credit (up to $5,000 per taxpayer) for individuals and families that contribute to HSAs to further incentivize health savings. Removes the maximum allowable annual contribution limit to HSAs, so that individuals may make unlimited contributions to an HSA. Allowing the use of HAS funds for insurance premiums will help make health coverage more affordable for American families. Furthermore, allowing HSAs to be used for a broader range of health-related expenses will give Americans the ability to afford the OTC drugs, dietary supplements, and nutrition and exercise programs to help maintain a healthy lifestyle and prevent chronic conditions.

Deduction for health costs. Equalizes the tax treatment of the purchase of health insurance for individuals and employers. By allowing individuals to deduct the cost of their health insurance from their income and payroll taxes, they will be empowered to purchase insurance independent of employment.

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