House Speaker Paul Ryan (R-WI) today released a House Republican plan to replace “Obamacare” and provide “every American access to quality, affordable health care.” The plan is part of a larger House Republican effort to provide a slate of ideas that “look past this president” to what House Republicans could achieve in 2017 and beyond.
Tax components of the House Republican health care plan [PDF 875 KB] include:
The following provides a summary of the tax components in the plan.
The plan would repeal all the tax increases imposed by “Obamacare.” According to the plan, the “most egregious” of these tax increases are:
Note that legislation enacted at the end of 2015 included two-year moratoria with respect to both the Cadillac tax and the medical device excise tax, as well as a one-year moratorium (for 2017) on the application of the fee applicable to health insurance providers. Thus, under current law, the medical device excise tax does not apply to sales of taxable medical devices between January 1, 2016, and December 31, 2017, and the Cadillac tax will not be in effect until January 1, 2020. Read KPMG’s description of the PATH Act [PDF 542 KB]
Note also that, as part of a markup of health-related tax legislation, the House Ways and Means Committee last week approved a bill (H.R. 3590) that would increase the floor on medical expense deductions to 10% of AGI. The House has not yet scheduled action on that bill, and the Senate has not indicated whether it would act on such legislation. Read TaxNewsFlash-Legislative Update
The House Republican plan proposes to expand tax-advantaged savings accounts tied to high-deductible plans by providing the following:
At last week’s House Ways and Means Committee mark-up of health-related tax legislation, the Committee also reported out (approved) legislation that would expand HSAs. Further, the House this week passed by voice vote a bill to clarify that individuals receiving care from tribal organizations or the Indian Health Service are eligible to participate in HSAs. Read TaxNewsFlash-Legislative Update. The Senate has not indicated whether it would act on these bills.
The House Republican plan proposes to provide a “universal advanceable, refundable tax credit” for those who do not have access to job-based coverage, Medicare, or Medicaid. According to the plan, a monthly payment would be available and would be adjusted for age, so that older Americans would receive more support. Persons receiving the credit could use the payment to help offset the costs of purchasing plans of their choice.
The amount of the credit is described as an amount that would be “large enough to purchase the typical pre-Obamacare health insurance plan.” If a credit recipient selected a health insurance plan that is less expensive than the value of the credit, the difference would be deposited into an HSA-like account and could be used toward other health care expenses (such as over-the-counter medicines or dental and vision care). The credit would not be available to those who are in the country unlawfully, and “this new payment would not be allowed to pay for abortion coverage or services.”
To help lower the cost of coverage, the House Republican plan proposes to cap the exclusion from gross income for employer-provided health insurance at an unspecified level that would affect only the “most generous” plans and would allow job-based coverage to continue unchanged for the vast majority of health insurance plans. Employee contributions made on a pre-tax basis to an HSA would not count towards the cost of coverage for purposes of the cap.
© 2016 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
The KPMG logo and name are trademarks of KPMG International. KPMG International is a Swiss cooperative that serves as a coordinating entity for a network of independent member firms. KPMG International provides no audit or other client services. Such services are provided solely by member firms in their respective geographic areas. KPMG International and its member firms are legally distinct and separate entities. They are not and nothing contained herein shall be construed to place these entities in the relationship of parents, subsidiaries, agents, partners, or joint venturers. No member firm has any authority (actual, apparent, implied or otherwise) to obligate or bind KPMG International or any member firm in any manner whatsoever. The information contained in herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at: + 1 202 533 4366, 1801 K Street NW, Washington, DC 20006.