GOP ACA Tax Replacement Leaked Bill Includes Tax Exclusion Cap | Mercer US

Leaked Draft of Health Bill Includes Tax Exclusion Cap

Our Thinking / Healthcare /

Leaked Draft of Health Bill Includes Tax Exclusion Cap
Calendar24 February 2017

Well, now we know. A week ago, House GOP leaders presented an outline of an ACA repeal and replace plan with a key element missing – the source of revenue to fund the tax credits that would replace subsidies to assist people buying individual insurance. Today, Politico reported that in a leaked draft of ACA repeal-and-replace legislation, GOP lawmakers are proposing to do away with all ACA taxes, including the Cadillac tax. The only source of revenue in the bill is a cap on the income tax exclusion for people receiving health benefits through an employer plan. This differs from the Cadillac tax in that it hits plan members directly, rather than the employer or the plan. The draft bill sets the threshold at relatively high levels, but it is easy to speculate that the threshold could come down if this provision alone must pay for the replace plan.

Of course, this is only a draft – a leaked draft at that – and our lawyers have only just begun reviewing it. But our earlier analyses have shown that under any cap scenario, lower-income people will see the biggest increase in their effective tax rate. Another concern is that, if the goal of the tax is to penalize the most generous plans, basing the cap on premium cost means that plans with older workers and more women,  and those located in high-cost areas of the country, will be likely to trigger the tax, since these factor all influence cost as much or more than plan design.

Give the Politico article a read, and if you’re concerned about the effect of a cap on your employee population, now would be a good time to let your representatives know.

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