Legislative update: Health care repeal would include tax provisions

Health care repeal would include tax provisions

The House of Representatives on January 6, 2016, passed H.R. 3762, the “Restoring Americans’ Healthcare Freedom Reconciliation Act of 2015,” by a 240-181 vote. The identical bill was passed by the Senate on December 3, 2015, by a 52-47 vote. The bill will be presented to the president shortly.

Related content

In a Statement of Administration Policy (December 2, 2015), the White House announced that the president would veto this bill if Congress were to pass it. Accordingly, the legislation is not expected to become law.

Tax measures

Included in the bill are a number of tax-related provisions that would modify or repeal measures that were enacted in association with the Affordable Care Act. These measures would: 

  • Modify rules governing excess advance payments of premium tax credits
  • Repeal the premium assistance tax credit and related programs
  • Repeal the small employer health insurance tax credit 
  • Repeal the individual and employer “mandates”
  • Repeal the excise tax on high cost employer-sponsored health coverage (the "Cadillac tax")—note that other recently enacted legislation contained a provision that delayed the implementation of this tax from 2018 to January 1, 2020. Read TaxNewsFlash-United States [PDF 538 KB]
  • Restore the ability of taxpayers to use “health savings accounts” (HSAs), Archer “medical savings accounts” (MSAs), “health flexible spending arrangements” (HFSAs), and health reimbursement arrangements to pay for certain over-the-counter medications
  • Decrease the tax on distributions from HSAs and Archer MSAs that are not used for medical expenses from 20% to 10% and 20% to 15%, respectively.
  • Repeal the $2500 annual cap on salary reduction contributions to an HFSA (thereby generally restoring the annual cap to $5000)
  • Repeal the annual fee on manufacturers and importers of certain prescription drugs
  • Repeal the excise tax on medical devices—note that other recently enacted legislation contained a provision that suspended this tax for 2016 and 2017— read TaxNewsFlash-United States [PDF 538 KB]
  • Repeal the annual fee on health insurers—note that other recently enacted legislation contained a provision that effectively eliminated this tax through December 31, 2017—read TaxNewsFlash-United States [PDF 538 KB]
  • Repeal the elimination of the deductibility of medical costs allocable to the Medicare Part D subsidy
  • Lower the threshold governing the deductibility of medical expenses from 10%  of adjusted gross income (AGI) to 7.5% of AGI 
  • Repeal the additional 0.9% Medicare tax imposed on certain high-income  individuals 
  • Repeal the 10% excise tax on indoor tanning services
  • Repeal the 3.8% Medicare tax imposed on the net investment income applicable to certain high income individuals
  • Repeal the special rule limiting the deductibility of employee compensation for certain highly paid employees of some health insurance providers
  • Repeal provisions relating to the codification of the economic substance doctrine (section 7701(o)) as well as number of penalties related to nondisclosure and underpayment of tax

CBO estimate

Read the CBO estimate of the bill that passed the Senate (identical to the bill that passed the House).

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