GOP Draft ACA Repeal Bill Caps Health Tax Exclusion

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By Colleen Murphy and Kaustuv Basu

The tax exemption for employer-sponsored health insurance would be capped at the 90th percentile of current premiums, according to a leaked draft text of the House’s Affordable Care Act repeal bill.

The draft, dated Feb. 10 and obtained by Bloomberg BNA from a member’s office, also repeals the law’s tax provisions, including the medical device tax and a 3.8 percent tax on net investment income for certain individuals. The penalties for people who lack insurance and employers that don’t provide it are zeroed out, mirroring action in a 2015 repeal bill that passed Congress but was vetoed by President Barack Obama.

It isn’t clear how much bill text has developed since this draft version, though the document does make good on a slew of promises Republican lawmakers have made in recent weeks as they jockey to dismantle the law. House Speaker Paul D. Ryan (R-Wis.) has said the House will release a bill after lawmakers return from recess next week, but lawmakers have been cautious to set specific dates for bill releases, markups or hearings on the topic.

Elements of the bill are being scored by the Congressional Budget Office. A Republican aide familiar with the draft bill cautioned that it might not be the most recent version.

“And even that will likely still change based off Congressional Budget Office feedback,” the aide said.

Two other Republican staffers said to take the draft with a grain of salt, because certain elements are still being debated—like how to fund Medicaid. Republicans plan to pass a bill by the end of March, the staffers said.

A House Ways and Means Committee aide declined to comment. Ryan’s office deferred to the Ways and Means Committee and Energy and Commerce Committee, the two panels working most specifically on crafting legislative language to dismantle the law through the filibuster-proof reconciliation process.

‘Recipe for Disaster.’

Top Democrats—such as Senate Minority Leader Charles E. Schumer (D-N.Y.) and Ways and Means ranking member Richard Neal (D-Mass.)—panned the draft late Friday.

The draft amounts to a tax cut for the wealthy and a tax hike for middle-class workers, Neal said in a Feb. 24 statement.

“There isn’t a single redeeming quality in the House Republican draft health legislation; rather, it’s a recipe for disaster for our nation’s health care program,” the statement said.

Checking Boxes

Many Republican lawmakers, including members of the hard-right House Freedom Caucus, have said they want to kill all the law’s taxes through repeal and replacement, though some have acknowledged that makes funding future plans a challenge.

The draft replaces the ACA’s subsidies with an age-adjusted tax credit that would total $2,000 for individuals under 30 and double for those over 60. The credit would take effect in 2020, according to the draft, which was first reported by Politico.

Other taxes repealed in the draft include excise taxes on over-the-counter medications, indoor tanning salons and health insurers. The tax provisions in the ACA, though controversial, provided billions of dollars in revenue to fund the law. Repealing the ACA would cost $137 billion between 2016 and 2025 when macroeconomic effects are considered, a calculation known as dynamic scoring, according to data from the CBO and Joint Committee on Taxation.

Individuals would have to pay a 30 percent higher premium for a year if they have a gap in coverage and decide to re-enroll, according to the draft.

Capping the Exemption

Ways and Means Committee Chairman Kevin Brady (R-Texas) has said lawmakers will offer a tax credit and unlock the tax exemption on employer-sponsored insurance to pay for the replacement plan. He has said that tax break totals $3.6 trillion over 10 years.

Still, critics say that move mirrors the much-hated “Cadillac tax,” a 40 percent excise tax on portions of high-cost health plans. Proponents of Brady’s method say it replaces an inefficient, regressive tax structure.

Brady told reporters Feb. 16, shortly before recess began, that lawmakers were still undecided on the scope of the cap and said it was one option they were considering.

With assistance from Alex Ruoff in Washington.

To contact the reporters on this story: Colleen Murphy in Baltimore at cmurphy@bna.com and Kaustuv Basu in Washington at kbasu@bna.com

To contact the editor responsible for this story: Meg Shreve at mshreve@bna.com

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