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ACA Replacement Bill Omits Employer Health Plan Tax

03/08/17

  10:43:00 pm, by MedBen5   , 347 words,  
Categories: News, Health Care Reform, Taxes

ACA Replacement Bill Omits Employer Health Plan Tax

IRS building

One of the major surprises of the Republican replacement plan to the Affordable Care Act ‒ tentatively called the "American Health Care Act (AHCA)" ‒ is not what's in it, but what House members left out: A provision eliminating or capping the tax deductibility of employer-sponsored group health coverage.

The provision was noteworthy in its absence because several GOP replacement bills had offered taxing employer-sponsored plans as a possible funding mechanism ‒ and indeed, an earlier leaked draft of the AHCA included such a provision. Why the provision was ultimately omitted is anyone's guess, but it's probable that many House Republicans feared a backlash from employers, many of whom would simply discontinue offering health coverage rather than paying prohibitively expensive taxes on it.

So what does the AHCA propose as a possible way to finance the law? None other than the oft-maligned "Cadillac" tax, once all but dead and buried, now miraculously resurrected. But rather than deal with the inevitable blowback by rolling out the tax immediately (or in 2020, when it's currently scheduled for implementation), the bill pushes the start date all the way back to 2025. The greater likelihood, however, is that the tax will never see the light of day ‒ its real purpose may be to have some funding mechanism in place when the Congressional Budget Office (CBO) scores the bill for potential costs.

Of course, the final version of the AHCA could be very different than the present one ‒ in fact, the brickbats currently being thrown by fellow GOP members at the bill all but ensures that significant revisions are forthcoming. So while employer tax breaks are unaffected at the moment, don't be shocked if talk of elimination or caps arises again.

Finally, while health plan taxes are particularly germane to MedBen clients, they're hardly the only aspect of the AHCA that may affect employers. As the bill evolves, we'll continue to keep you informed on the latest developments and what they mean for your business. In the meantime, clients with questions about the AHCA are welcome to contact Vice President of Compliance Caroline Fraker at 800-851-0907 or cfraker@medben.com.

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