|Congress Presses Forward on its Reconciliation Repeal of the ACA; White House Plans Comprehensive Tax Reform|
Republicans in Congress are continuing to deliberate how best to move forward to making their slogan of “repeal and replace” a reality after nearly seven years of campaigning to reverse the Affordable Care Act. House Speaker Paul Ryan established a tight timetable to make good on this work, following passage of a budget blueprint by both the House and Senate last month to use the budget reconciliation process to repeal major tax-and-spending components of the law. But the January 27 deadline was effectively ignored by the committees, who were tasked with reporting their plans to be able to begin marking up a package and have it ready for a floor vote by late February. The current goal is now for the House Ways and Means and Energy and Commerce committees to begin working on the reconciliation instruction legislation by the end of the month.|
It’s becoming increasingly clear that Republicans have moved significantly from President Trump’s repeated promises of repeal and replace on day one, particularly given an interview by the president this week when he claimed that this process could take all of this year and go into next year. This timeframe lines up more closely with how the ACA was passed, roughly 14 months after President Obama took office, and following several political hurdles to advance the law without any Republican support. Acknowledging the more drawn-out timetable, Senator Jeff Flake (R-AZ) stated this week, “I'm certainly hearing more people put less emphasis on the timeline and more emphasis on doing it right.”
This week, a blueprint began to emerge with several Republican healthcare hallmarks, including expanding Health Savings Accounts, reinstating high-risk pools and providing tax credits to purchase insurance. Republicans have acknowledged that they largely agree on the fundamentals of healthcare policy, as Senator Bill Cassidy (R-LA), who last week introduced his own plan to allow states to effectively keep the ACA, said, “There is so much common ground…it’s 90% there.” Despite the agreement on major factors of a plan, none of the proposals have helped the party coalesce on any plan to put forward as a replacement.
Part of this may be due to waiting out the White House, which may be working on their own plan—something that appears to even mystify lawmakers on the other end of Pennsylvania Avenue. However, Senate HELP Committee Chairman Lamar Alexander (R-TN) welcomes a plan by the president, saying, “We've got our own ideas and we'll pass our own bill, but it's hard to do anything this complex unless the president is directly involved.” He added, “It's hard to see how this gets done unless the president says, ‘OK, let's do it this way.’”
As the lack of consensus draws on, more are coming around to the idea of passing piecemeal replacements, as the hearings last week suggested. Many also are seeking to avoid sweeping changes in line with the ACA, instead looking to work on bipartisan solutions with Democrats that would meet a 60-vote threshold in the senate. NAHU has long favored this process and has been working with legislators of both parties since the law was passed to make changes to the healthcare law. In recent years, NAHU has been able to garner bipartisan support on a number of smaller changes to the ACA, including a delay to the Cadillac/excise tax and Health Insurance Tax, repeal of the small-group expansion and auto-enrollment provisions, the law’s 1099 requirement, long-term care CLASS Act and the $2,000/4,000 deductible cap. While NAHU is working with legislators on larger changes to the ACA in the ongoing discussions of a repeal and replacement, we will also continue to advocate for smaller changes to the law in the interim.
A major hurdle for passing a repeal-and-replace plan will be to get support from the House Freedom Caucus, a group of roughly three dozen of the most conservative Republican lawmakers who often buck the party on principle—often related to spending measures. Their support will be critical for passage in the House, where Republicans can only afford to lose 21 votes to reach the necessary 218 for majority. The plan introduced by Senator Rand Paul (R-KY) last month could be a possible route, given Paul’s similar positions on government spending. Representative Mark Meadows (R-NC), chair of the caucus, has not yet indicated any legislation that the group expects to back or whether it will introduce its own proposal. In order to garner an official endorsement, 80% of the group must support the legislation.
In addition to the reconciliation repeal of the ACA, Congress is seeking to pass a second reconciliation package that would deal with tax reform. This week, President Trump suggested that major tax reforms would be made this year, stating that, “we're going to be announcing something, I would say, over the next two or three weeks that will be phenomenal in terms of tax.” Trump’s tax plan has called for reducing corporate taxes to 15% to 20% but he has not provided additional details on his plans. White House Press Secretary Sean Spicer responded to questions this week, claiming, “It is going to be the first time that this nation's seen a full, comprehensive tax reform in a long, long time."
Among the items that could be included in the tax package, if it is not addressed in the ACA reconciliation package, would be changes to the employer exclusion of health insurance. The exclusion allows an employer’s contributions to an employee’s health insurance to be excluded from that employee’s compensation for income and payroll tax purposes. It is the basis of the employer-based system and has proven highly efficient at providing American workers and their families with affordable coverage options through group purchasing and its associated economies of scale by spreading risk and avoiding adverse selection. NAHU strongly opposes any efforts that would eliminate or cap the employer-tax exclusion for health insurance as eliminating the exclusion would eliminate the incentive for employer-sponsored insurance, while capping it would degrade the benefit and serve as a tax increase for middle-class Americans.
Many leading Republicans in Congress have called for major changes to the exclusion, which could be incorporated into either reconciliation packages. Eliminating the exclusion would eliminate most of the benefits of employer-sponsored insurance, including the means for spreading risk among healthy and unhealthy individuals and group purchasing efficiencies. Capping the exclusion for employees would devalue the benefit and result in a significant tax increase for middle-class Americans, forcing many to drop employer-sponsored insurance, including dependent coverage. Employers would be incentivized to only offer coverage to their employees that would fall below the value of the cap in order to avoid paying any increased taxes, potentially resulting in a race to the bottom for employers to sponsor insurance that wouldn’t meet the cap’s thresholds and further shifting costs onto employees. We contend that many of the inherent problems with the Cadillac/excise tax would exist for eliminating the employer exclusion.
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