Added March 11 - Link to Ways and Means Copy of the Bill.

The House Ways and Means Committee has released the markup version of the American Health Care Act, the proposed replacement for the Affordable Care Act. The committee will meet on March 8 to begin the mark up process.

The bill in its present form is merely a starting point for the process of the modification, repeal and/or replacement of various provisions that were enacted in 2010 as part of the Patient Protection and Affordable Care Act and the Healthcare Reconciliation Act.

This brief article is not a comprehensive analysis of the tax provisions in the bill—as I did when the ACA was making its way through Congress, I will reserve any significant analysis until we have a bill that is clear will be enacted as is (or virtually as is) as law. It is tax season and I learned long ago that it’s easy to waste a lot of time studying provisions that never become law if you dive deeply into bill text this early in the process. But the markup does give some insight into a possible path forward on the various revisions to tax provisions that were part of the ACA.

One interesting item of note is that the bill does not, as was widely anticipated, repeal the Cadillac tax—but it arguably does so in a practical sense. The tax on “overly expensive” coverage remains part of the law, but its effective date is now pushed back to 2025. Most likely this provision remains in the law simply to keep the budget impact within a range where the authors are comfortable, counting this revenue beginning in 2025. However, this author has noted in the past that when Congress keeps delaying the effective date of something that makes the budget cost of bills look acceptable such provisions rarely actually ever take effect.

As well, Congress did not touch the codification of the economic substance doctrine, a provision added in the ACA and that some had expected to be repealed as part of the process of revising and unwinding various ACA provisions. Neither does the bill provide for a cap on the amount that an employer can exclude from an employee’s income when providing health insurance—a provision some had suggested would appear in this bill.

Some other key tax related provisions of the bill are (as outlined by Tax Analysts and bill descriptions by the Committee):

The net investment income tax would be repealed effective for tax years beginning after December 31, 2017
A new, age-adjusted tax credit would be added for those purchasing private health insurance.
- The amount of the credit would be set by age:
  - Under age 30 - $2,000
  - Age 30-39 - $2,500
  - Age 40-49 - $3,000
  - Age 50-59 - $3,500
  - Age 60+ - $4,000
- The credit would also be phased out in $100 increments for each $1,000 in income above the following caps:
  - Joint filers - $150,000
  - Others - $75,000
- Families would be allowed to combine the credit, with a maximum credit of $14,000 for a single family
- Individuals who have access to government health insurance programs or employer provided health insurance would not be eligible for the credit
- The credit would be both refundable and advanceable, with Treasury responsible for coming up with the details on the program
The ACA health insurance credit would be substantially modified and then repealed beginning in 2020
- Individuals would have to repay any excess advance credit, regardless of their income, for 2018 and 2019
- The credit could only be used to purchase catastrophic health plans
The shared responsibility payment rules would be repealed immediately, and penalty relief would be offered for those subject to the penalty for 2016
HSA rules would be changed
- Spouses could make catch-up contributions
- Contributions limits would be increased to
  - $6,550 for individuals
  - $13,100 for family coverage
- HSA funds could be used to purchase over the counter drugs
- The additional tax on use of funds for non-medical expenses would be reduced

It is far too early to begin planning based on these provisions, since the bill must clear the committee and the House, as well as make its way through the Senate. It’s not clear right now that this bill, as written, would be able to pass, especially in the Senate where the Republicans could only survive two no votes from their members if all of the Democrats refuse to vote for the bill (as seems likely).

But, at least to this author, it seems likely that some bill will eventually emerge given the promise to repeal the ACA on which virtually all Republicans ran this past election. For those of us in tax practice, the key right now is to track the progress of this bill, as well as any modifications that are made.