Senate Pivots Toward Comprehensive Tax Reform for the ACA

Concerns about the House Bill to “Repeal and Replace” Obamacare, which is laden with tax reform, is the biggest obstacle facing the Senate this month as Senate Republicans bat around the Bill.  It almost goes without saying that nary a Democrat will vote in favor of the Bill.  However, if the Senate can reach a consensus (50 votes) they will be good to go – after all, majority rules.

As a recap, the Bill would repeal a key piece of the Obamacare legislation – the mandates that Individuals must get health insurance coverage and that Employers must provide health insurance to their workers.

So, what’s on the table for tax reforms relative to the ACA?

  • The expansion of Medicaid insurance for the poor – they like to say it’s “winding down.”
  • The elimination of $1T in taxes on the rich, insurance carriers and drug manufacturers (created specifically to fund the ACA)
  • A shift in the tax-exempt status of employer-provided health care plans

I have shared with you extensively that the individual marketplace is tanking.  It seems to some that the meatiest place to find funds to prop it up is to tax employer-sponsored benefits.  According to the CBO, the employer-sponsored health benefits tax exemption is worth trillions in forgone tax revenue.

Here’s the rub, Trump vowed to cut the corporate tax rate from 35 to 20 percent and to reduce the individual tax code brackets from seven to three.  So, grappling with this issue to tax something currently not taxed versus cutting corporate tax represents a tremendous disparity in ideology.

In addition to tax reform discussions, the Senate has been thinking through how to entice the young and healthy among us to buy individual coverage once the individual mandate to purchase is eliminated.

Apparently, using the Healthcare.gov enrollment system was and continues to be a bear.  So, the government is considering allowing other web-based systems (that meet CMS criteria) to collect enrollment information from consumers and enroll consumers directly into the Exchanges. Assuming this will make enrollment easier and faster, those who want health insurance (but don’t necessarily need it) will be more likely to purchase – thus increasing sales to young, healthy consumers.

I’m skeptical.  Millennials, the target consumer these days, don’t give a hoot about enrolling and buying health insurance no matter how easy it is.   What do you think?

Posted in: Affordable Care Act

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