Affordable Care Act Repeal: A Numbers Game?

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By Colleen Murphy

Lawmakers are touting plans to repeal the Affordable Care Act in the early days of President-elect Donald Trump’s administration, and the move would have sweeping tax implications.

It is unclear exactly how lawmakers plan to replace the law, or maintain coverage for those who became insured under it, but action is all but certain as Republicans have held control of Congress. In the replacement, lawmakers will need to find a way to continue to fund the legislation and provide subsidies, while scrapping loathed elements, practitioners specializing in health care and tax law told Bloomberg BNA.

While questions remain, one element of repeal is clear: it will decrease tax revenue and increase the federal budget, according to analyses from the Joint Committee on Taxation, Congressional Budget Office and Tax Policy Center. Repealing the ACA would cost $137 billion between 2016 and 2025 when macroeconomic effects are considered, a calculation known as dynamic scoring. If those effects are excluded, the deficit would increase by $353 billion in that time frame.

“That’s a significant increase in the deficit really related to repeal of the tax provisions, and the tax provisions at issue are kind of across the board,” said Amy Bergner, a managing director of health care and benefits at PricewaterhouseCoopers LLP in Washington.

Here is a look at some of the revenue and costs associated with the ACA.

What Is Included?

The ACA included several new tax provisions designed to curb certain behaviors—like visiting tanning salons—and to raise revenue, which would all likely be scrapped in the replacement process, said Roberton Williams, the Sol Price Fellow at the Urban-Brookings Tax Policy Center.

“Some good things will go away, some bad things will go away, depending on your perspective,” he said Dec. 12.

Two of the elements, a 40 percent excise tax on the part of high-cost health plans that exceed the limits known as the “Cadillac tax” and an excise tax on health insurers, haven’t yet taken effect. The Cadillac tax, one of the law’s most unpopular provisions, is set to take effect in 2020 and would bring in about $7 billion, according to the data.

There is a moratorium for 2017 on the health insurer tax, which is a fixed fee imposed on the entire industry totaling $13.9 billion for that year.

The health insurer tax, along with taxes on medical device manufacturers and pharmaceutical companies, is projected to bring in $19 billion in 2020, according to the data.

Two different surtaxes on high-income families—a 0.9 percent payroll tax and a 3.8 percent tax on net investment income for individuals with incomes of more than $200,000 and couples with incomes of more than. $250,000—are projected to bring in $35 billion in fiscal year 2020, the largest revenue raiser associated with the law, according to the Tax Policy Center.

“There is a concern about what would replace these various taxes in order to help fund whatever the replacement might be,” Bergner said Dec. 13.

What About Penalties?

About 20 million people gained coverage under the law, according to a recent estimate from the Department of Health and Human Services. In order to spur individuals to get coverage, and force certain employers to offer it, the law included penalties.

The individual insurance mandate is projected to bring in $4 billion in fiscal year 2020, and the employer mandate to offer coverage is projected to bring in $16 billion. The penalties were included in legislation ( H.R. 3762) passed last year to repeal the law, though the amounts were reduced to zero, effectively killing them. President Barack Obama vetoed the legislation on Jan. 8, 2016.

That bill may be an indicator of Republican priorities as they attack the law next year, practitioners said. The bill was passed using reconciliation, a process that allows the Senate’s majority party to pass legislation from a budget resolution without interference from the minority party, which could otherwise impede bills that lack the support of 60 or more senators. Lawmakers have said they will again use reconciliation to tackle the ACA in 2017.

“The assumption is the bill we saw pass will be the starting point. We’ll see debate around the provisions, obviously, but I think that’s a sound assumption to make,” said Michael F. Mundaca, co-director of the national tax department and the Americas Tax Center at Ernst & Young LLP.

A Future for Tax Credits?

Repealing the ACA would also scrap tax credits that helped individuals purchase insurance—something lawmakers may need to figure out in a replacement plan. A tax credit to help families purchase insurance through exchanges was projected to cost $70 billion in 2020, and one to help small employers purchase insurance was projected to cost $1 billion, according to the data.

Although lawmakers may not like the idea of a subsidy, there will need to be a provision for low-income individuals to be able to purchase coverage, Bergner said.

Such a provision is just one of many elements of a replacement that lawmakers must suss out in the next year. To make a smooth transition, lawmakers will also need to carefully consider the effective dates of any changes, said Mundaca, a former assistant secretary for tax policy at the Treasury Department. Also, it won’t be possible to tally revenue numbers for new legislation until the entire package comes forward, he said.

“This is a live-fire exercise at this point,” he said.

To contact the reporter on this story: Colleen Murphy in Washington at

To contact the editor responsible for this story: Meg Shreve at

For More Information

Text of H.R. 3762 is at

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