UPDATED: Congress passes massive tax bill that nixes individual mandate
Congress passed a major rewrite of the tax code Wednesday, which includes the repeal of the Affordable Care Act’s (ACA) individual mandate, a cornerstone of the health law. President Donald Trump is expected to sign the bill into law in the coming days.
The legislation cuts the corporate tax rate from 35% to 21%. That should benefit health insurers and hospitals, which tend to pay higher effective tax rates.
Sen. Susan Collins (R-Maine) voted for the measure after assurances from Senate Majority Leader Mitch McConnell that she would get separate budget legislation to bolster the ACA exchange markets by funding cost sharing reduction payments and reinsurance programs. Such measures are far from certain, however.
After multiple failed attempts to repeal the ACA this year, Republicans have finally struck a major blow to the law with the impending repeal of the individual mandate.
Hospitals and insurers strongly oppose eliminating the mandate, which will leave about 14 million fewer people with coverage in 2026 and premium increases of about 20%, according to the Congressional Budget Office. The move will likely lead to a more dicey risk pool for insurers and fewer paying patients for hospitals.
Repealing the individual mandate penalty will hobble the ACA. But the heart of the law — expanded Medicaid, premium subsidies, and protections for pre-existing conditions — still remain.— Larry Levitt (@larry_levitt) December 20, 2017
Despite the aims of Collins, a moderate Republican, the prospects of fixes to the law before the end of the year are uncertain. Many House Republicans are not eager to do anything to prop up the law they've campaigned for years to undo. Also, Congress must pass a funding bill this week or face a government shutdown.
The rate of insured could also be compromised if the changes to the tax code trigger automatic cuts to Medicare that could reach $25 billion a year under congressional budget rules.
One big win for industry: The final bill keeps the ability of hospitals to use so-called private activity bonds to finance infrastructure and other investments. It also retains hospitals' ability to execute tax-exempt advance refundings of outstanding tax-exempt bonds, which the American Hospital Association said is "an important means for reducing hospital borrowing costs."
The final bill also retains the deduction for certain medical expenses and lowers the threshold from 10% to 7.5% of gross income for two years.
With the individual mandate repealed, attention is likely to turn to the states for potential additional regulation. Larry Levitt, senior vice president of the Kaiser Family Foundation, said states have a few options, including implementing their own mandate, promoting premium subsidies or instituting reinsurance programs, continuous coverage requirements or late enrollment penalties.
Although the GOP has failed to fully repeal the ACA this year, the Trump administration has taken a number of actions to undermine and weaken the law. HHS dramatically decreased outreach and advertising of the recent open enrollment period. Trump has also discontinued cost-sharing reduction payments to insurers and issued an executive order paving the way for more catastrophic health plans.