Implications of Tax Bill on Health Reform

On Saturday, December 2, 2017, a proposed U.S. tax bill passed in the Senate. Among other tax implications, the bill eliminates the Individual Mandate penalty for not having health insurance. This proposed ACA change would not go into effect until 2019.

This bill must go through additional steps for it to become law. In November, the House passed its own version of the tax bill that did not include a change to the Individual Mandate. Now, the bill will go through the Committee process to iron out the differences between the Senate and House versions.

What’s the impact to the Employer Mandate if the Tax Bill becomes law?

The tax bill will not directly impact the Employer Mandate or employer reporting requirements. Employers will continue to be required to provide evidence of having offered affordable coverage to their employees, and this information will continue to be used to confirm eligibility for Premium Tax Credits (PTC) to purchase insurance on the individual market. Therefore, employer reporting will continue to be required.

How will the repeal of the Individual Mandate penalty impact healthcare insurance?

The Congressional Budget Office (CBO) estimates the repeal of the Individual Mandate penalty in 2019 would provide the following impact:

  • Average nongroup premiums will increase by 10 percent in most years
  • Nongroup markets, in general, will continue to be stable
  • The number of insured would decrease by 13 million in 2027
  • Two million employed individuals would drop their employer coverage by 2021

State law complexity may grow

With the removal of the requirement at the Federal level, some democratic states may choose to enact legislation requiring residents to have health insurance. For example, before the ACA, 1 in 6 Californians did not have health care, and now only 7% are not covered. California is looking for ways to continue to keep high levels of insured people to minimize additional Medicaid costs and the cost of uninsured people going to the hospital. The state may be one of several that choose to enact their own legislation in lieu of federal laws. Employers should be prepared for additional state-level healthcare compliance requirements.

Reporting season is here. The due date for employee Form 1095 statements is January 31, 2018. Please let us know how we can make your ACA reporting easier.