Republican Senators Keep ACA Taxes in Replacement Bill

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By Colleen Murphy

The Affordable Care Act’s tax provisions would stay in place for the time being under replacement legislation introduced by two Republican senators.

Revenue from the taxes is “essential” in the replacement, and would be left alone until lawmakers revisit the issue as part of a tax overhaul later this year, Sen. Bill Cassidy (R-La.), who co-sponsored the bill, said during a Jan. 23 news conference. The Patient Freedom Act is an updated version of legislation he introduced in the last Congress, which gives states the option to keep the Affordable Care Act, scrap it or switch to a system involving health savings accounts.

Republican lawmakers generally agree that the ACA isn’t working and must be replaced, but there is less consensus on how to handle the tax provisions that brought in revenue to fund the law. Some, like House Ways and Means Committee Chairman Kevin Brady (R-Texas), have called for all the taxes to be repealed, as was done in a repeal bill passed by Congress in 2015 but vetoed by former President Barack Obama.

“My preference is we preserve the revenue until the second reconciliation, at which point we may want to change it as part of tax reform, but it would be part of comprehensive tax reform as opposed to piecemeal,” Cassidy said.

The Plan

The bill repeals the individual and employer mandates, which require individuals to obtain coverage and employers to offer it. It preserves the ability for individuals to stay on their parents’ plan until age 26, and keeps prohibitions on exclusions for pre-existing conditions and annual and lifetime limits, according to a summary released Jan. 23.

States that choose not to continue implementing the ACA can create a new market-based system and receive federal funding equal to 95 percent of premium tax credits and cost-sharing subsidies, as well as a federal match for Medicaid expansion, according to the summary. States can choose to receive the funds as beneficiary grants or advanceable refundable tax credits. The funds will be placed in health savings accounts.

States may also decide to design and regulate insurance markets without any federal assistance. The goal of the bill is to expand coverage to the 30 million individuals who aren’t covered under the ACA, co-sponsor Sen. Susan Collins (R-Maine) said during the news conference.

The Future

Cassidy said he has discussed the bill with Senate Majority Leader Mitch McConnell (R-Ky.). He said he also hopes to get input from Rep. Tom Price (R-Ga.), President Donald Trump’s pick for secretary of Health and Human Services. Price, who has previously crafted bills to take apart the ACA, will have his Senate Finance Committee confirmation hearing on Jan. 24.

Moving the “locus of repeal” to the states should help the bill get the 60 votes needed to pass, Cassidy said.

But the proposal is “a far cry” from a full replacement plan, Senate Minority Leader Charles E. Schumer (D-N.Y.) said in a Jan. 23 statement.

“Ultimately, this proposal is an empty facade that would create chaos—not care—for millions of Americans,” Schumer said.

Trump’s Executive Order ‘Confusing.’

Trump signed an executive order Jan. 20 instructing federal agencies to “minimize the unwarranted economic and regulatory burdens” of the ACA until it can be repealed. Agency chiefs may waive, defer or delay any burdensome provisions, and should provide as much flexibility to states as possible, according to the order.

The order is “confusing” and its impact won’t be clear until Trump’s Treasury Department nominees are put in place to interpret regulations and issue rules, Collins said. Still, the order “by no means takes away the need for comprehensive legislation,” she said.

Trump may stop enforcing the individual mandate, a requirement that individuals maintain insurance, Kellyanne Conway, counselor to the president, said Jan. 22 on ABC's “This Week.”

What Does It Mean for IRS?

While the order signals a policy shift, it is unlikely that the IRS will make sweeping adjustments to how it applies the law, Timothy Jost, a professor emeritus at the Washington and Lee University School of Law, told Bloomberg BNA.

“I don’t think that the IRS can simply decide it’s not going to collect a tax that is mandated by law, and the provisions of the ACA are already in place, I don’t know how you can delay a law that is already effective,” he said.

Still, the Trump administration may direct the agency to more loosely interpret elements of the law to ease any strain on individuals, Damian Myers, an associate at Proskauer LLP in Washington, told Bloomberg BNA. For example, the agency may ease its assessments of hardship exemption requests to allow more individuals to qualify, he said. Currently, individuals in difficult circumstances, such as bankruptcy, can request to be excused from the requirement to maintain insurance.

“That would alleviate some of the burden,” Myers said. “But hardship does mean hardship, so there has to be some sort of discretion—you can’t completely ignore it without a change in the regulations.”

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 the Patient Freedom Act summary is at

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