This is part of Baker Tilly’s series exploring the impact of ongoing U.S. healthcare reform.
In mid-September, Sens. Lindsey Graham and Bill Cassidy, along with Sens. Dean Heller and Ron Johnson, released the Graham-Cassidy-Heller-Johnson (GCHJ) bill which repeals the Affordable Care Act (ACA) and replaces it with an annual block grant to states to help individuals pay for healthcare.
Due to procedural rules in the Senate, the clock is ticking on Senate Republicans’ ability to repeal and replace the ACA. The deadline to pass the bill with a simple majority of 51 votes is Sept. 30. Otherwise, to pass by a simple majority, it would have to be part of the next fiscal year’s budget reconciliation process, but that is being reserved for tax reform. If the bill does pass the Senate, the House would also have to approve it during this timeframe.
Key components of the GCHJ bill
- Repeals the individual mandate and employer mandate retroactive to calendar-year 2016
- Rescinds the medical device tax on sales after Dec. 31, 2017
- This tax is currently under a moratorium for 2016 and 2017
- Retains the 3.8 percent net investment income tax (NIIT) and the 0.9 percent additional Medicare tax
- Requires individuals receiving premium tax credits to repay excess amounts beginning in 2018
- Repeals the premium tax credits as of Jan. 1, 2020
- Dismantles the small business health insurance tax credit beginning Jan. 1, 2020
- Increases health savings accounts (HSAs) annual contribution amounts to match out-of-pocket limits for HSA-qualified high-deductible health plans (HDHPs) for self-only and family coverage beginning in tax-year 2018
- Allows insurance premiums to be paid for using HSAs
- Provides annual federal block grants to states to help individuals pay for healthcare
- Repeals Medicaid funding for Planned Parenthood for one year
- Health insurance premiums for older and disabled Americans would likely increase due to cuts to Medicaid expansion
- Medicare would not be changed
- Repeal cost-sharing subsidies in 2020, which give discounts for deductibles and copayments
A major sticking point for lawmakers has been the rushed process to vote on the bill. Without a full report from the Congressional Budget Office, lawmakers won’t know how much the bill will cost the government or how many people could potentially lose their coverage.
Baker Tilly observations - what this means to you
In order for the Senate to pass the GCHJ bill using the reconciliation process (meaning senators rely solely on the 52 Republican votes to pass given the united Democratic opposition to repealing the ACA), a vote must take place prior to the Sept. 30 government year-end. Since a vote has not yet been scheduled, it is unclear whether this bill can gain any traction. Also, several senators do not want to cast a vote without a CBO score; which is not expected until after the end of this month. Straight passage in the House is not guaranteed which means even if the GCHJ bill does pass the Senate, any House modifications to the bill would mean a re-vote in the Senate. Consequently, passage of the GCHJ bill is highly uncertain.
It does not appear the ACA taxes, the 3.8 percent NIIT and 0.9 percent additional Medicare tax are being repealed in this bill. However, with potential tax reform on the horizon, these taxes may be addressed as part of a larger tax overhaul. With that being said, these taxes are currently still in place for 2017 and should remain part of any year-end tax planning.
While insurers are still required by law to provide health insurance coverage to everyone, the GCHJ bill would allow states to use waivers to get rid of protections for people with pre-existing conditions and also obtain waivers to get rid of required coverage for essential health benefits, like maternity care, which could mean higher premiums for sick people.
Since insurance companies have already been preparing estimates for 2018 plans, the impact of the GCHJ bill has not been evaluated into the cost of employer-sponsored coverage. As a result, we recommend you maintain regular contact with your insurance agent/broker to monitor how this proposal could influence your renewals for next year’s insurance coverage.
The information provided here is of a general nature and is not intended to address the specific circumstances of any individual or entity. In specific circumstances, the services of a professional should be sought. Tax information, if any, contained in this communication was not intended or written to be used by any person for the purpose of avoiding penalties, nor should such information be construed as an opinion upon which any person may rely. The intended recipients of this communication and any attachments are not subject to any limitation on the disclosure of the tax treatment or tax structure of any transaction or matter that is the subject of this communication and any attachments.