July 21, 2017

In This Issue
Senate Republicans Scrap Repeal and Replace, Will Attempt Repeal and Delay or Move onto Repair
House Republicans Approve Policy to Cap the Employer Exclusion of Health Insurance, NAHU to Continue Advocacy for Employer Sponsored Insurance as Republicans Move on to Tax Reform
NAHU Submits Comments on the DOL Fiduciary Rule Implementation
Trump Administration Makes July Cost-Sharing Payment Despite President’s Desire to “Let It Fail”
Health Reform May be on Hold, but You Should Still Meet with Your Legislators Next Month!
Did You Miss Yesterday’s Compliance Corner Webinar on Protecting Your Organization from Cyber Threats? Watch it Now!
NAHU’s Lobbyists Discuss Association’s Response to the ACA Repeal Status on this Week’s Podcast
HUPAC Roundup
What We’re Reading
E-mail the Editor
Visit the NAHU Website
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House Republicans Approve Policy to Cap the Employer Exclusion of Health Insurance, NAHU to Continue Advocacy for Employer Sponsored Insurance as Republicans Move on to Tax Reform

The House Appropriations Committee began the process of marking up their budget resolution on Wednesday and included a non-binding policy statement that would implement a cap on the employer exclusion of health insurance. NAHU is closely monitoring this issue given the damaging effects such a policy could have on employer sponsored insurance (ESI), your clients health insurance options, the significant income tax increase on Americans, and the ability of agents and brokers to service the needs of your clients. We will continue to follow the budget process and advocate on your behalf for the preservation of the employer-based system. At this time, the non-binding nature of the statement is more of a formality of the complex budget process, and there will be many more steps before this could be adopted as actual policy.


As some in Congress work out the details of their budget, elsewhere on the Hill, others are determining next steps for tax reform. Shortly after it became clear that there weren’t enough votes to consider the Better Care Reconciliation Act (BCRA), several leading Republicans in both the House and Senate suggested they will next move on to tax reform. On Tuesday, Senate Majority Leader Mitch McConnell (R-KY) said that following the planned vote next week on a repeal-only package of the ACA, they would be “moving on to comprehensive tax reform and to infrastructure.” Similarly, Representative Mark Meadows (R-NC), who chairs the conservative House Freedom Caucus, said “I think what we do is change the instructions for [fiscal year] FY17 and make it tax reform and go ahead and do that…I think there's a lot more agreement on tax reform than there is on the complexities of health care.”


As with healthcare, tax reform could be advanced through a reconciliation package that would only require 51 votes for passage. The Congressional Budget Act permits only one reconciliation vehicle per budget resolution, but because Congress didn’t pass a budget for FY 2017 in 2016, they will be able to advance both a FY 2017 and FY 2018 budget and reconciliation packages this year. The FY 2017 budget was passed in January, paving the way for the reconciliation vehicle to be used for healthcare, and Congress is in the process of moving a FY 2018 budget that would establish instructions for using reconciliation on tax reform. This is the first time in the 43-year history of the Congressional Budget Act that Congress would pass two budget resolutions in the same year.


In April, the White House released a draft one-page tax reform plan calling for comprehensive tax reform that they claim would be the largest tax cut for businesses and individuals in American history. The “2017 Tax Reform for Economic Growth and American Jobs” calls for simplifying the Tax Code, reducing the corporate tax rate from 35% to 15%, and reducing the current seven individual tax brackets to three at 10%, 25% and 35%. It also calls for doubling the standard individual deduction and providing tax relief for families with child and dependent care expenses, in addition to repealing the Alternative Minimum Tax and the ACA’s 3.8% tax on investment income. These changes would be paid for in part through a one-time tax on overseas holdings.


While the limited plan did not include any proposal to eliminate or cap the employer exclusion, NAHU remains concerned about the potential for this to ultimately be considered to help offset the significant revenue losses caused by the comprehensive tax reform plan. Without the passage of healthcare reform legislation, the tax reform package will need to make changes without the offsets that were expected to be passed in the healthcare package, including nearly $1 trillion in ACA tax reforms. This could lead many Republicans in Congress to consider changes to the exclusion to help offset the costs of the package and work around their significant disagreements over several key issues in the tax reform plan, such as a proposed border adjustability tax, interest deductibility, and the overall size and impact of the tax package.


Many Republicans in Congress, led by House Speaker Paul Ryan (R-WI), have called for significant changes to the employer exclusion. Last year’s Republican blueprint document, “A Better Way,” called for a cap on the exclusion, and the first iteration of the House’s reconciliation bill (which was not officially filed) called for a cap at 90% of the plan’s value that would be taxable for income and payroll purposes. That proposal was ultimately pulled in the version that passed the House in May. Republicans contend that modifying the exclusion would result in Americans having more control over their coverage, reduce job-lock, and result in greater transparency and reduced costs.


NAHU is very concerned about plans that would make significant changes to the exclusion, as it forms the basis of the employer-based insurance system that provides coverage to upwards of 175 million Americans. 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. Proposals that modify the exclusion could push individuals from group coverage into the individual market, which would be ripe for adverse selection, leading to higher insurer losses participating in these markets. Insurers would likely offset these losses by reducing provider networks and increasing cost-sharing. Many of the inherent problems with the Cadillac/excise tax would exist for modifying the employer exclusion.


Additionally, moving from a group insurance marketplace to an individualized marketplace would cause considerable strain on the enrollment process. Group plans are highly efficient at seamlessly enrolling millions into coverage, and without these group plans agents and brokers would be faced with enrolling upwards of 175 million Americans individually into plans. The ACA has demonstrated the challenges of enrolling as few as 13 million consumers onto the federal and state marketplaces and NAHU is concerned about any proposal that would move more individuals from group insurance to the individual market. We will continue to advocate for policies that will preserve the employer exclusion and maintain your clients’ health insurance.
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