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Repealing Obamacare: New House GOP Healthcare Plan Has Significant Tax Implications


3/20/17

Issue
 
On March 6, 2017, House GOP leaders introduced their long-awaited repeal and replacement plan for Obamacare, a.k.a. the Affordable Care Act (ACA). The House plan – called the American Health Care Act – would eliminate many of ACA’s taxes and penalties imposed in conjunction with individual and employer compliance mandates.
 
As anticipated, House Democrats, and some Republicans, have denounced the American Health Care Act. For Democrats, a key concern is that some individuals with coverage under ACA would no longer be covered. For some Republicans, the new healthcare plan does not go far enough in its dismantling of the ACA.

A Long Row to Hoe?

While President Trump has voiced his approval for the new plan, almost immediately after its introduction, the House began negotiating and fine tuning the American Health Care Act in an effort to secure its approval in the House. From there, it would require Senate approval and the President’s signature to be enacted into law.
 
The time frame for passage of the new healthcare legislation, and what that legislation will ultimately look like, is anyone’s guess. However, as you begin to consider the potential impact of the American Health Care Act on your company and its employees, we are outlining a number of the key tax changes/provisions that are currently associated with the legislation.
 
 
Issue
What’s Different: The American Health Care Act vs. ACA
Individual/employer mandates
Mandates/penalties would be repealed; effective for months beginning after 12/31/15 penalties would be retroactively reduced to zero. 
Tax credits ACA tax credits would be repealed, a new age-based refundable credit ranging from $2,000 to $4,000 would apply to individuals who secure coverage and are not covered by a government/employer health plan. The cap on families is $14,000 per year with credits and caps adjusted for inflation.
Net Investment Income Tax (NII)
 
Current NII imposed on taxpayers would be repealed for tax years beginning after 12/31/17.
Additional Medicare Tax The 0.9% tax on employee compensation and self-employment income above certain thresholds would be repealed for tax years beginning after 12/31/17.
Excise tax on high-dollar health plans  The 40% excise tax on “Cadillac plans”, currently scheduled to apply to tax years after 12/21/17, would be further delayed to 2025 to coordinate with budget reconciliation requirements.
Other excise taxes The current excise taxes on medical devices and tanning services would be repealed after 12/31/17.
Health insurance provider fee
The fee imposed on health insurers, currently in moratorium through 2017, would be repealed for calendar years beginning after 12/31/17.


 

What Does CohnReznick Think?

The tax changes outlined above constitute just some of the provisions that would result from repealing the ACA and replacing it with the House GOP proposal. The newly proposed plan also has significant implications for the deduction of medical expenses, health savings accounts, and much more.

CohnReznick will continue to monitor and advise you of implications as Congress continues to work toward a new plan for healthcare coverage in the U.S.

Contact

If you would like to discuss the topics addressed in this tax briefing, please contact Kenneth Kanter, Managing Partner – Tax, at kenneth.kanter@cohnreznick.com or 973-364-6668.
 
Any advice contained in this communication, including attachments and enclosures, is not intended as a thorough, in-depth analysis of specific issues. Nor is it sufficient to avoid tax-related penalties. This has been prepared for information purposes and general guidance only and does not constitute professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is made as to the accuracy or completeness of the information contained in this publication, and CohnReznick LLP, its members, employees and agents accept no liability, and disclaim all responsibility, for the consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it. 
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