Tax Legislation Impact on Health Insurance
The pending tax bill passed by both Houses of Congress will have a significant impact on the Affordable Care Act (ACA), with both what’s in the bill, and what’s not. It also demonstrates the new direction this administration is taking in crippling the ACA, since it has failed in its full repeal.
The tax bill is removing a key component of the ACA: the Individual Mandate. By eliminating the mandate, Americans will no longer be fined for not maintaining qualified health insurance for longer than a 3 month period during the tax year. The mandate is still in effect for the 2017 and 2018 tax years, but goes away in 2019. The penalty for not maintaining coverage in 2017 is $695 per adult, $347.50 per child 18<, or 2.5% of household income, whichever is greater and up to a maximum of $2,085 (Healthcare.gov).
The effect the removal of the mandate will have is uncertain, but the Congressional Budget Office (CBO) estimates 13 million more people will go without health insurance by 2027. Insurance markets are wary of adverse selection, the purchasing of insurance by only those who have high, or increasing, insurable expenses, and are expected to react with increases in premiums to offset potential losses.
While the Individual Mandate has been the recent political focus, the Employer Mandate continues to fly under the radar. Since this mandate wasn’t addressed in the bill, employers with over 50 full-time equivalent employees are still required to offer affordable and qualified coverage, or be subject to penalties. Collection of fines under this mandate for 2015 began in 2017, and reporting for 2017 tax year is due on January 31, 2018.
The ACA has been a target of the Republicans in Congress since the laws inception, but they’ve not been able to garner enough support for a full repeal. What we continue to see are many smaller provisions being changed, or eliminated, through either legislation like this tax bill, or through executive action. We foresee this continuing to be the direction this administration maintains, chipping away at the ACA over time. Stay tuned, as more changes are definitely on the way…