ACA “Repeal and Replace” Update


On March 6, 2017, House Republicans announced a bill to partially repeal and replace the Affordable Care Act (ACA). As of now nothing has yet been passed by Congress or signed into law by President Trump.



Employer Shared Responsibility

The current proposed bill would reduce any penalties to $0 for Applicable Large Employers (ALEs) who don’t offer adequate and affordable health insurance to full-time employees and their dependents. This reduction could take place retroactive to January 2016.

However, what the proposed bill fails to address is the requirement for Applicable Large Groups (ALE) to furnish and file Forms 1094-C and 1095-C. As the bill currently stands, ALEs would continue to be required to file these forms each year or be subject to significant penalties for filing incorrect returns, late returns, or not filing at all.

Cadillac Tax Delay

The current effective date of the 40% excise tax on high-cost employer-sponsored health coverage (referred to as the “Cadillac Tax”) would be delayed from January 1, 2020, to January 1, 2025.

Elimination of Additional Medicare Taxes

Effective January 2018, the proposed bill would repeal the additional Medicare tax that imposes an additional tax on income of $200,000 or more for individuals, $250,000 or more for joint returns, and $125,000 or more for married taxpayers filing separate returns. This would have payroll implications as employers have been required to withhold an additional 0.9% on Medicare subject wages over $200,000 to support the additional tax.

Affordability and Individual Market Stability Impact

Individual Mandate Not Repealed, but Penalty Reduced to $0.

While the individual mandate would not be repealed under this proposed bill, it would reduce the mandate penalty to $0 for individuals who do not have health insurance coverage for themselves and their dependents, retroactive to January 1, 2016. The proposed bill doesn’t address reporting requirements for individuals.

Premium Tax Credits and Subsidies Repealed

The proposed bill would eliminate premium tax credits for individuals who obtain health insurance through a federal or state health insurance marketplace (exchange) as of January 1, 2020. It would also repeal cost-sharing reductions (and payments to issuers for such reductions) for plan years beginning after December 31, 2019.

Health Insurance Tax Credit

Under the new proposed bill, there would be an advanceable, refundable tax credit for health insurance coverage offered in the individual health insurance market or through unsubsidized COBRA. The amount of the credit ranges from $2,000 to $4,000 based on age.  This amount would be reduced by 10 percent of any excess of the taxpayer’s modified adjusted gross income (MAGI) over $75,000 for individuals and $150,000 in case of a joint return. (These thresholds would be adjusted for inflation.) The maximum credit amount would be $14,000 per family with the five oldest individuals in the family counted in the calculation.

Age Rating Band

For plan years beginning on or after January 1, 2018, the Secretary of Health and Human Services, would be permitted to authorize a variance of 5 to 1 (up from 3 to 1) in premium rates charged by a health insurance issuer for coverage for adults. States would have the flexibility to establish another ratio. This would allow insurers to charge older individuals higher premiums for plans.

Continuous Coverage

To encourage people to buy and keep coverage, insurers would be permitted beginning with the 2019 plan year (or 2018 for special enrollments) to charge a 30 percent penalty to people who let their insurance lapse and then try to buy a new policy.

Elimination of Other ACA Taxes

The proposed bill addresses a list of other ACA related taxes including repealing the tax on prescription and over-the-counter medications, the health insurance tax, and the medical device tax. It would also reduce the level of medical expenses that must be incurred to claim a tax deduction from 10 percent back to the pre- ACA 7.5 percent.

Flexible Spending Accounts and Health Savings Accounts

This proposed bill would modify or repeal many of the current restrictions on health flexible spending accounts (FSAs) and health savings accounts (HSAs), including:

  • repealing the FSA contribution limit of $2,500,
  • increasing the maximum tax subsidized amounts that can be contributed to HSAs to the amount of the out-of-pocket limit,
  • repealing the ACA prohibition against paying for over-the-counter medications with tax subsidized funds from FSAs, HSAs, Archer medical savings accounts (MSAs), or health reimbursement arrangements (HRAs), and
  • repealing the penalty for the use of HSA distribution for non-eligible expenses from 20 to 10 percent.

Do not rely on this proposed bill just yet.  It’s a starting point! See: House Speaker Ryan’s Plan: A Better Way and the leaked House Republican discussion draft.  In addition, the Health Savings Act of 2017 has already been introduced in both the House and the Senate.


Information contained in this BLOG is not intended to render tax or legal advice. Employers should consult with qualified legal and/or tax counsel for guidance with respect to matters of law, tax and related regulations. Creative Benefits & Insurance Solutions provides comprehensive benefits advice and administrative services with respect to all forms of employee benefits, risk management, property & casualty, workers’ compensation, staffing insurance and human resources services. For additional information about our services, please contact us at (586) 992-0404 or email us at


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