House ACA Bill Sets Stage for CBO Score, Tax Credit Battles

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By Colleen Murphy

Republicans abandoned the idea of capping the tax exemption for employer-sponsored health care plans in their updated Affordable Care Act repeal bill.

The change is a major departure from a previous leaked draft, which capped the exemption at the 90th percentile of current premiums. The cap was floated as an option to fund the replacement plan, but critics panned it for being a new version of the politically unpopular “Cadillac tax,” a 40 percent excise tax on portions of high-cost health plans.

Both committees steering the rewrite of the law— Ways and Means and Energy and Commerce—are set to hold markups March 8. The markups will occur without final scores on the bill’s budget impact from the Congressional Budget Office, kicking off a three-week blitz to move legislation through the House. Republican lawmakers have struggled so far this session to drum up consensus for a repeal plan, and have bickered over options to fund the replacement.

“We begin by repealing the awful taxes, the mandate penalties and the subsidies in Obamacare,” House Ways and Means Committee Chairman Kevin Brady (R-Texas) told Fox News March 6 in an interview shortly after the bill’s release.

The Cadillac tax is repealed in the bill but will return in 2025 to comply with the Senate rules governing the filibuster-proof reconciliation process. The bill repeals many of the ACA’s taxes and retroactively repeals the penalties for employers who fail to provide coverage and individuals who fail to obtain it. Those repeals are in line with a draft that leaked Feb. 24 and are consistent with past efforts to scrap the law.

The bill includes the advanceable, refundable, age-adjusted tax credit lawmakers have floated, but with a twist: it is capped at individual income of $75,000 and for joint filers at $150,000. Making the tax credit both age-adjusted and linked to earnings signals an effort to strike a balance between lawmakers in the House Freedom Caucus and the Republican Study Committee who fear a new entitlement program, with those who see a refundable credit as the only way to help low-income individuals afford insurance.

Here are some of the main sticking points to watch for in a markup.

Missing Revenue Impact

The lack of a score means members will be voting before understanding the full budget scope of the bill—though Rep. Chris Collins (R-N.Y.), a member of Energy and Commerce’s Health Subcommittee, previously said numbers could be adjusted down the line. Several Republican lawmakers, including some on Ways and Means, have said they need to see a full bill before reaching a decision on certain controversial elements, such as the proposed tax credit.

The lack of CBO scores on the bill will be an easy target for lawmakers looking to pick apart the bill. Sen. Bill Cassidy (R-La.) said he would like to see the CBO scores.

“You want to know it’s fiscally responsible,” Cassidy said. “The taxpayer can’t get hosed.”

Republicans will need to include some numbers or estimates in talks to prove they have moved beyond high-level concepts, Garrett A. Fenton, a member at Miller and Chevalier Chartered in Washington, told Bloomberg BNA March 6. Still, going ahead with a markup without a score is “a very tricky thing politically” and will signal whether Republicans can stick to their timeline.

“Obviously that’s a big question mark right now, because a lot of Republicans are on the fence waiting to see how those numbers come out,” he said.

Still, the score from the CBO provides important context about the impact of a bill’s provisions. An early version of the House plan would have cost between 10 million and 20 million jobs, according to CBO estimates at the time, the Federalist reported March 6.

No Employer Cap

Ditching the cap on employer health plans saves Republicans from at least one point of contention going into a markup. A Feb. 10 leaked draft of the repeal bill included a cap at the 90th percentile of current premiums on the tax exemption for employer-sponsored health plans.

The limitation was Brady’s top choice to fund the replacement plan, though some lawmakers said they were undecided until they could see full legislation. Other critics said it would swell over time because while it is indexed for inflation, inflation is far lower than medical inflation year-to-year.

The cap was the “absolute, No. 1 issue in repeal and replace,” James Gelfand, senior vice president of health policy for the ERISA Industry Committee, an insurance industry group, told Bloomberg BNA March 6.

When asked about Republicans moving away from the idea, Sen. Shelley Moore Capito (R-W.Va.) said, “That tells me there was a lot of opposition to it. I mean, I’m not a rocket scientist, but you know.”

Refundable Tax Credit Concerns

Republicans have sparred over inclusion in the bill of a refundable tax credit, which is subtracted from an individual’s tax debt. Critics say it is a new entitlement program, while supporters say it is the only way to actually help low-income people who won’t benefit from a tax deduction.

Some members of the Freedom Caucus and the Republican Study Committee have been the most vocal opponents to the provision thus far. But that criticism is more a reflection of Freedom Caucus members looking for something to oppose in the bill, rather than a serious policy-based criticism, a Republican aide told Bloomberg BNA.

The credit totals $2,000 for individuals younger than 30 and doubles for those older than 60. The credit would take effect in 2020, according to the bill. The credits are additive for a family and capped at $14,000.

Sen. Rand Paul (R-Ky.), one of the most boisterous opponents to a refundable tax credit, said March 6 he isn’t impressed by the bill. Paul’s replacement proposal (S. 222), and a House version, have been backed by the Freedom Caucus.

“It still looks like Obamacare-lite to me. It’s going to have to be better,” he said.

Effect on Employers

Employers may still face burdensome tax-reporting requirements under a revamped system, because the Internal Revenue Service will still need details about the types of coverage offered and the individuals who receive it, practitioners have said.

While redoing the reporting requirements is likely outside the scope of the filibuster-proof reconciliation process Republicans are using to pass the bill, lawmakers should use the markup to begin discussing it, Christine Pollack, vice president of government affairs at the Retail Industry Leaders Association, told Bloomberg BNA. The draft did point to a new reporting system for individual tax credits starting in 2020.

“First and foremost, we are currently living under a system that is extremely complicated, burdensome and complex and aside from what is created in 2020 and beyond, we need relief now on the current requirements,” she said.

Streamlining the requirements was on the short list of items to be addressed during the lame-duck congressional session, but that plan was derailed when Donald Trump beat Hillary Clinton in the presidential election, crystallizing the chances of ACA repeal. Bills were introduced in the House (H.R. 2712) and Senate (S. 1996) last session, and the RILA would be open to a separate bill again, Pollack said.

Using the budget reconciliation process means the bill can be passed with a simple majority but can only include provisions related to the budget. Though the bill zeroes out the penalty on employers for failing to provide insurance, it still does “nothing to address tax penalties and reporting requirements and complication,” Pollack said.

Medicaid Drama

The repeal bill could face trouble in the Senate. Four Republican senators in a March 6 letter to Senate Majority Leader Mitch McConnell (R-Ky.), opposed major reductions in federal Medicaid spending, outlined in a repeal bill draft that leaked in February.

Republicans can’t afford to lose the support of more than two senators and retain their majority in the Senate without support from Democrats. The four senators who signed the letter were Rob Portman (R-Ohio), Capito, Cory Gardner (R-Colo.) and Lisa Murkowski (R-Alaska).

Republicans are planning deep cuts in Medicaid spending, starting in 2020. The bill will allow the ACA’s Medicaid expansion funding to continue until Jan. 1, 2020, then would freeze those funds permanently. Anyone who joined a Medicaid program under the expansion who falls off Medicaid when their income rises wouldn’t be allowed to rejoin.

To replace support for poor Americans, the bill would distribute $100 billion in state grants. These grants could be used to help create high-risk pools for people with expensive, ongoing health conditions.

No Transparency

Democrats have panned the committees for being tight-lipped in the creation of legislation, and when Energy and Commerce members reviewed a draft March 2, some lawmakers went on a hunt across the Capitol searching for it.

While the committees appear to be sticking to the required time window before holding markups, this issue is likely to come up during the talks. Rep. Richard E. Neal (D-Mass.), the Ways and Means ranking member, held a news conference on the matter last week, requesting hearings before any markup. He is likely to raise the transparency concerns again during the markup, an aide told Bloomberg BNA.

“Congressional Republicans are leading a desperate forced march to pass a dangerous bill written in secret which few members of Congress have seen, let alone read,” Senate Finance Committee ranking member Ron Wyden (D-Ore.) said in a March 6 statement.

And the process hasn’t just rankled Democrats. Paul “remains very concerned with the lack of transparency,” an aide said March 6.

Avoiding Amendments

Rep. George Holding (R-N.C.), a Ways and Means member, said he was looking forward to a “healthy discussion” in the Ways and Means markup and coming up with a great product.

“Hopefully we not only bring our conference but maybe some bipartisanship,” Holding said. “It still addresses the need in this country that people without health care, you know, have the opportunity to have health care.”

There will likely be a push for Republicans not to support any bill amendments during markups, for fear of throwing off the bill’s ability to pass Senate rules, said Gelfand, who spent four years as a Hill staffer covering health care issues. Amendments will likely be offered and subsequently withdrawn, and any amendments from Democrats will fail, he said.

“They’re crafting this carefully balanced thing supposed to reduce the deficit and meet certain policy goals and to please all these various constituencies,” Gelfand said. “The last thing leadership wants is for members to go in and poke around.”

With assistance from Kaustuv Basu, Laura Davison and Alex Ruoff in Washington.

To contact the reporter on this story: Colleen Murphy in Washington at cmurphy@bna.com

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

For More Information

Text of the Ways and Means portion of the bill is at http://src.bna.com/mKZ.Text of the Energy and Commerce portion of the bill is at http://src.bna.com/mK0.

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