Status of American Health Care Act

• Published date: 01 May 2017
• Date: 01 May 2017
• DOI: http://doi.org/10.1002/npc.30322

Bruce R. Hopkins’ NONPROFIT COUNSEL

7

May 2017

THE LAW OF TAX-EXEMPT ORGANIZATIONS MONTHLY

Bruce R. Hopkins’ Nonprofit Counsel DOI:10.1002/npc

recognition of tax exemption, filed using Form 1023-EZ,

is now available electronically (IR-2017-41). This infor-

mation pertains to applications beginning in mid-2014

(when the streamlined application was introduced (see

the June 2014 issue)) through 2016. This information

will be updated quarterly, starting with the first quarter

of 2017. (The IRS’s Tax Exempt and Government Entities

Division approved more than 105,000 applications sub-

mitted on Form 1023-EZ during 2014–2016.)

IRS Commissioner John Koskinen said: “The new

online availability of Form 1023-EZ data is an important

step forward and will allow taxpayers to more easily

research information on tax-exempt organizations. The

IRS is committed to ongoing improvements in taxpayer

service across the agency and we continue to look for

innovative ways like this to provide taxpayers the infor-

mation they need, when they need it.” [26.1(h)] ◆

STATUS OF AMERICAN

HEALTH CARE ACT

The House Committee on Ways and Means, on

March 9, approved its version of the American Health

Care Act—the prospective replacement of the Patient

Protection and Affordable Care Act—by a party-line

(23–16) vote. The markup took nearly 18 hours, ending

at 4:30 a.m.

Summary of Act

A principal feature of this proposal is repeal of the

tax law provisions that underlie the Affordable Care Act.

The Joint Committee on Taxation projected that elimina-

tion of these taxes would decrease federal government

revenue by about $594 billion over 10 years. These taxes

include the 3.8 percent tax on investment income for

high-income taxpayers (revenue loss of $158 billion),

the additional Medicare tax ($117 billion), the “Cadil-

lac” tax ($49 billion), and the tanning tax ($600 million).

The measure would repeal the individual and employer

mandates, and institute a refundable tax credit for low-

income individuals.

The House Energy and Commerce Committee subse-

quently passed its portion of the Act.

The New York Times reported on March 10 that

President Trump is “marshaling the full power of his

office” to win passage of the Act. The president wants

to get health care legislation behind him so as to focus

on tax reform and infrastructure legislation.

CBO, JCT Scoring

The Congressional Budget Office and the staff

of the Joint Committee on Taxation produced, on

March 13, an estimate of the budgetary effects of the

proposed Act, consisting of the legislation approved

by the two committees. The two principal estimates

emanating from this analysis are that enactment of the

Act would reduce the federal deficit by $337 billion

over the 2017–2026 period and that the number of

individuals who would be uninsured in 2026 would be

increased by 24 million when compared to the current

law’s expected outcome.

The largest savings would come from reductions

in outlays for Medicaid and from elimination of the

Patient Protection and Affordable Care Act’s subsi-

dies for nongroup health insurance (that is, insurance

purchased individually). The largest costs would come

from repeal of the ACA taxes and establishment of the

health insurance tax credit.

It is estimated that, in 2018, 14 million more people

would be uninsured under the Act than under current

law. Most of that increase would stem from repeal of

the penalties associated with the individual mandate.

Later, following additional changes to subsidies for

insurance purchased in the nongroup market and to

the Medicaid program, the increase in the number of

uninsured individuals relative to the number under cur-

rent law would rise to 21 million in 2020, then to 24

million in 2026.

The reductions in insurance coverage between 2018

and 2026 would occur largely because of changes in

Medicaid enrollment. The CBO and Joint Committee

staff are assuming that “some states would discontinue

their expansion of eligibility, some states that would

have expanded eligibility in the future would choose

not to do so, and per-enrollee spending in the program

would be capped.” In 2026, an estimated 52 million

individuals would be uninsured, compared with the

28 million people who would lack insurance that year

under current law.

This report observes that decisions about offering

and purchasing health insurance depend on the stabil-

ity of the health insurance market—that is, “on hav-

ing insurers participating in most areas of the country

and on the likelihood of premiums not rising in an

unsustainable spiral.” In the CBO’s and Joint Commit-

tee staff’s assessment, however, the nongroup market

“would probably be stable in most areas under either

current law or the legislation.”

This stability would exist, under current law,

because “most subsidized enrollees purchasing health

insurance coverage in the nongroup market are largely

insulated from increases in premiums because their

out-of-pocket payments for premiums are based on a

percentage of their income; the government pays the

difference.” The subsidies to purchase coverage com-

bined with the penalties paid by uninsured individuals

by reason of the individual mandate are “anticipated

to cause sufficient demand for insurance by people

with low health care expenditures for the market to

be stable.” ◆