Components of ACA Proposed for Repeal

VII. Key Issues: Regulation & Reform >> C. Health Reform >> Affordable Care Act (ACA) >> ACA Repeal >> Components of ACA Proposed for Repeal (last updated 5.7.17)

Overview

Congressional Research Service. Legislative Actions to Repeal, Defund, or Delay the Affordable Care Act. December 9, 2015. Table 2. ACA Provisions in Bills Approved by the House in the 112th, 113th, and 114th Congresses summarizes major ACA provisions in authorizing legislation that passed the House in 2011-2012(112th Congress), 2013-2014 (113th Congress) and 2015 (114th Congress to date) but was not approved by the Senate.

Other Components Proposed for Repeal (Ranked by Budgetary Impact)

The items below are listed in approximate order of their expected impact on the federal budget deficit, starting with items expected to achieve the greatest deficit reduction.

Deficit-Reducing Repeal Provisions

As of 1.6.16, there have been 10 specific provisions proposed for repeal whose elimination would produce a net reduction in the federal deficit. If all 10 were adopted, it would reduce the 10-year deficit (2016-2025) by as much as $1,024.5 billion.

Premium Tax Credits and Cost-Sharing Reductions

  • Current Initiatives. The Budget Reconciliation passed by the Senate on 12.3.15 repeals the premium tax credits; cost-sharing reductions; and the HHS Secretary’s authority to determine individuals’ eligibility to participate in an exchange and receive the tax credits and cost-sharing reductions. Repeals the IRS’s authority to disclose taxpayer return information to HHS for eligibility determinations. All these provisions take effect after December 31, 2017 (no comparable provision in House version)  (Table 3).
  • Budget Impact. CBO’s score did not separately break out the dollar savings from repeal of the premium tax credits and cost-sharing reductions. However, CBO had earlier estimated 10-year savings (2016-2025) of $822 billion from repeal of Exchange subsidies (but this figure includes spending for exchange grants to states and net spending and revenues for risk adjustment and reinsurance: Table 2).

Employer Mandate

  • Current Initiatives. The Budget Reconciliation passed by the House on 10.23.15 repeals the employer mandate and associated penalties, effective January 1, 2015; according to Timothy Jost, “because the Senate Parliamentarian decided that outright mandate repeals could not be included in a budget reconciliation bill under the Senate rules, the legislation did not eliminate the mandates but simply amended them to provide that there would be no penalty for noncompliance.” Accordingly, the Senate version passed 12.3.15 eliminates the penalties for failing to comply with the employer mandate, effective January 1, 2015 (Table 3). Further discussion here.
  • Political Prospects.
    • The Case for Repeal. In Why Not Just Eliminate the Employer Mandate? (5.14) Urban Instituteresearchers have made the case that the employer mandate will not lead to more people getting coverage because those firms that don’t provide it will likely opt for the penalty. They estimate that most employers wouldn’t drop coverage if the penalties were eliminated, in part, because of the tax benefits. All told, only 500,000 would lose employer coverage after the mandate is repealed–a decline of just 0.3%.
    • Bipartisan Support. Paige Winfield and Kyle Cheney. Why liberals are abandoning the Obamacare employer mandate. Politico. 7.6.14. Authors document that many believe employer mandate creates as many problems as it solves, so there is a growing consensus to abandon it, but probably not until 2015 due to concerns about 2014 elections.
  • Budget Impact.
    • CBO’s score of the Senate version did not separately break out the dollar savings from repeal of the employer mandate.
    • However, CBO did project (Table 3) that repeal of the individual and employer mandate together would reduce the deficit by $147.1 billion over 10 years (FY2016-2025).
    • In an earlier report (June 2015), CBO had estimated that lost penalty payments from employers resulting from repeal of the ACA would increase the deficit by $167 billion over the same 10 years (inclusive of the associated effects on revenues of changes in taxable compensation); in contrast the parallel loss of penalty payments from the individual mandate was expected to be about $43 billion (Table 2). Thus, the pro rata share of the $147.1 billion attributable to employers would be ~$117 billion.
    • Timothy Jost notes “curiously, the bill does not repeal the ACA’s reporting requirements that apply to large employers and insurers, which are subject to their own penalty.  Thus employers would have to continue to report compliance with the mandate even though they faced no penalties for noncompliance.”

Individual Mandate

  • Past Initiatives. In March 2014, the House voted 250-160 to delay the ACA’s individual mandate for a year. The bill from Rep. Lynn Jenkins (R-Kan.) picked up support from 27 Democrats.
  • Current Initiatives. The Budget Reconciliation passed by the House on 10.23.15 repeals the individual mandate and associated penalties, effective January 1, 2015; according to Timothy Jost, “because the Senate Parliamentarian decided that outright mandate repeals could not be included in a budget reconciliation bill under the Senate rules, the legislation did not eliminate the mandates but simply amended them to provide that there would be no penalty for noncompliance.” Accordingly, the Senate version passed 12.3.15 eliminates the penalties for failing to comply with the individual mandate, effective January 1, 2015 (Table 3). Further discussion here.
  • Budget Impact.
    • CBO’s score did not separately break out the dollar savings from repeal of the individual mandate.
    • However, CBO had earlier estimated that a one-year delay of the individual mandate would save about $9 billion over 10 years.
    • CBO projects (Table 3) that repeal of the individual and employer mandate together would reduce the deficit by $147.1 billion over 10 years (FY2016-2025). The pro rata share due to the individual mandate is roughly $30 billion (see calculation in Employer Mandate).

Medicaid Expansion

  • Current Initiatives. Sec. 207 of the Budget Reconciliation passed by the Senate on 12.3.15 repeals the optional Medicaid expansion on December 31, 2017. This section of the Senate-passed bill also repeals several other ACA Medicaid provisions (no comparable provision in House version)  (Table 3).
  • Budget Impact. CBO’s score did not separately break out the coverage-related dollar savings from repeal of the Medicaid expansion. However, CBO projects that repeal of non-coverage related Medicaid provisions would reduce outlays by $15.0 billion over 10 years (FY2016-2025).

Prevention and Public Health Fund (PPHF)

  • Current Initiatives. Full repeal of funding for PPHS was included in the Budget Reconciliation passed by the House on 10.23.15 and the Senate on 12.3.15 (Table 3). Further discussion here.
  • Budget Impact. CBO projects that repeal of PPHF funding would reduce outlays by $12.7 billion over 10 years (FY2016-2025).

Small Business Tax Credits

  • Current Initiatives. The Budget Reconciliation passed by the Senate on 12.3.15 repeals the tax credit for small employers with no more than 25 FTEs. The repeal applies to taxable years ending after December 31, 2017 (no comparable provision in House version) (Table 3).
  • Budget Impact. CBO’s score for the Senate bill did not separately break out the dollar savings from this provision. However, in an earlier report (June 2015), CBO had estimated that elimination of small business tax credits resulting from repeal of the ACA would reduce the deficit by $11 billion over the same 10 years (inclusive of the associated effects on revenues of changes in taxable compensation) (Table 2).

Premium Tax Credits Overpayments

  • Current Initiatives. The Budget Reconciliation passed by the Senate on 12.3.15 repeals temporarily the limits on the amount of any premium tax credit overpayment that has to be repaid to the government (no comparable provision in House version) (Table 3).
  • Budget Impact. CBO projects that this provision would reduce outlays by $6.1 billion and increase revenues by $2.6 billion over 10 years (FY2016-2025), for a net gain of $8.7 billion.

Auto-Enrollment for Certain Large Employers

  • Current Initiatives. Full repeal of aut0-enrollment was included in the Budget Reconciliation passed by the House on 11.2.15 (Table 3). Further discussion here.
  • Budget Impact. CBO projects (Table 3) that repeal of auto-enrollment would reduce the deficit by $7.9 billion over 10 years (FY2016-2025).

Funding for U.S. Territories

  • Background. The ACA appropriated $1 billion for U.S. territories that elect to establish an exchange. The funds are available through 2019 (Table 3).
  • Current Initiatives. Sec. 207 of the Budget Reconciliation passed by the Senate on 12.3.15 prohibits the HHS Secretary from allocating ACA funds to Puerto Rico and the other U.S. territories, effective January 1, 2018 (no comparable provision in House version)  (Table 3).
  • Budget Impact. CBO projects that this provision would reduce outlays by $0.2 billion over 10 years (FY2016-2025).

Risk Reinsurance

  • Current Initiatives. The Budget Reconciliation passed by the Senate on 12.3.15 prohibits the HHS Secretary from collecting risk reinsurance fees or making payments, effective January 1, 2016 (no comparable provision in House version) (Table 3).
  • Budget Impact. CBO’s score did not separately break out the dollar savings but it would appear that the loss in revenues would be entirely offset by reductions in payments.

Deficit-Increasing Repeal Provisions

As of 1.6.16, there were 16 specific provisions proposed for repeal whose elimination would produce a net increase in the federal deficit. If all 16 were adopted, it would increase the 10-year deficit (2016-2025) by as much as $745 billion.

Increased Penalties On Nonqualified HSA Withdrawals (Health Savings Account Tax)

Limitation of Excessive Remuneration Paid By Certain Health Insurance Providers

  • Background. The ACA added a provision in the tax code which prohibits health insurance providers from deducting as business expenses any remuneration paid to an officer, director, or employee in excess of $500,000.
  • Current Initiatives. The Budget Reconciliation passed by the Senate on 12.3.15 terminates this provision (no comparable provision in House version) (Table 3).
  • Budget Impact. CBO projects that this provision would reduce revenues by $0.6 billion over 10 years (FY2016-2025).

Excise Tax on Indoor Tanning Services

  • Background. The ACA imposes a 10% excise tax on indoor tanning services.
  • Current Initiatives. The Budget Reconciliation passed by the Senate on 12.3.15 repeals the ACA’s 10% excise tax on indoor tanning services, effective December 31, 2015 (no comparable provision in House version) (Table 3).
  • Budget Impact. CBO projects that this provision would reduce revenues by $0.8 billion over 10 years (FY2016-2025).

Elimination of Tax Deduction for Medicare Part D Subsidy

Codify Economic Substance Doctrine

Tax on Over-the-Counter Medications (“Medicine Cabinet Tax”)

Independent Payment Advisory Board

Medical Device Tax

Drug Manufacturers/Importers Tax (Tax on Prescription Medications)

  • Background. The ACA imposes an annual fee on branded drug sales, proceeds of which are dedicated to Medicare Part B Trust Fund.
  • Current Initiatives. The Budget Reconciliation passed by the Senate on 12.3.15 repeals the ACA’s annual fee on manufacturers and importers of branded prescription drugs, effective January 1, 2016 (no comparable provision in House version) (Table 3).
  • Budget Impact. CBO projects that this provision would reduce revenues by $29.6 billion over 10 years (FY2016-2025).

Limits On FSA Contributions (“Special Needs Kids Tax”)

Medicaid DSH Payment Reductions

  • Background. The ACA, as amended, directs the HHS Secretary to make aggregate reductions in Medicaid DSH allotments for FY2018 through FY2025.
  • Current Initiatives. The Budget Reconciliation passed by the Senate on 12.3.15 repeals the ACA’s reductions in Medicaid disproportionate share hospital (DSH) payments (no comparable provision in House version) (Table 3).
  • Budget Impact. CBO projects that this provision would increase outlays by $37.5 billion over 10 years (FY2016-2025).

Raise “Haircut” for Medical Itemized Deduction from 7.5% to 10% of AGI (Chronic Care Tax)

  • Background. Taxpayers who itemize their deductions may deduct qualifying medical expenses that exceed 10% of their adjusted gross income. The ACA had increased the threshold from 7.5% to 10%.
  • Current Initiatives. The Budget Reconciliation passed by the Senate on 12.3.15 reduces the income threshold for deducting medical expenses from 10% to 7.5%, effective for taxable years beginning after December 31, 2015 (no comparable provision in House version) (Table 3).
  • Budget Impact. CBO projects that this provision would reduce revenues by $40.0 billion over 10 years (FY2016-2025).

Excise Tax on Comprehensive Health Insurance Plans (Cadillac Tax)

  • Current Initiatives. Full repeal of the Cadillac tax was included in the Budget Reconciliation passed by the House on 10.23.15 and the Senate on 12.3.15 (Table 3). Further discussion here. Also see Calls for Repeal atExcise Tax on Comprehensive Health Insurance Plans (Cadillac Tax).
  • Budget Impact. CBO projects (Table 3) that repeal of the Cadillac tax would increase the deficit by $91.1 billion over 10 years (FY2016-2025).

Medicare Surtax on Higher-Income Individuals

Health Insurance Tax (HIT)

  • Current Initiatives. The Budget Reconciliation passed by the Senate on 12.3.15 repeals the ACA’s annual fee on certain health insurance providers, effective January 1, 2016 (no comparable provision in House version) (Table 3).
    “At the start of [2017], Marilyn Tavenner, president and CEO of America’s Health Insurance Plans, wrote a blog post calling for the repeal of the tax, and insurance company leaders have raised it in recent earnings calls, even attributing a delay in the tax this year as contributing to better-than-expected growth… It netted $8 billion in 2014, increased by 41 percent in 2015, to $11.3 billion, and after 2019 it will increase each year according to premium growth. Insurers estimate that if implemented next year, the tax would raise premiums for customers by roughly 3 percent.” (Washington Examiner, 5.1.17)
  • Political Prospects. According to AHIP (6.17.13), there is a bipartisan House majority (218 cosponsors) to repeal the tax on health insurers, but there likewise are no “pay-fors” in these bills, dimming their political prospects. It was reported in July 2013 that the health insurance industry was seeking to have the tax repealed as part of more comprehensive tax reform.
  • Budget Impact. CBO projects that this provision would reduce revenues by $142.2 billion over 10 years (FY2016-2025). See here for other analyses that estimate the tax’s impact on households and industry.

Medicare Surtax on Investment Income