HomeWashington Letter2017 ▶ ACA Health Insurance Mandate Repeal Signed into Law as Part of Tax Reform
ACA Health Insurance Mandate Repeal Signed into Law as Part of Tax Reform

This week, Congress passed tax reform legislation that includes a number of provisions that will impact the physician and patient community, foremost among them is a repeal of the Affordable Care Act’s (ACA) individual health insurance mandate tax penalties. The insurance mandate repeal, which will go into effect in 2019, is expected to have significant negative effects on the individual insurance market. The nonpartisan Congressional Budget Office has estimated that repeal of the mandate’s tax penalties will result in 13 million Americans losing health insurance, and an estimated 10 percent increase in insurance premiums.  It is also projected to result in destabilization of the individual insurance market through adverse selection of healthy consumers.

Other measures in the tax law of interest to ATS members include:

  • A temporary expansion of the medical expense deduction, permitting medical expenses exceeding 7.5 percent of income to be deducted for 2017 and 2018, and returning to the current threshold of 10 percent for tax year 2019 and beyond
  • A narrowing of the orphan drug tax credit, which incentivizes rare disease research, by reducing the tax credit from the current 50 percent that drug companies can receive for clinical trial costs to 27 percent. This measure may serve to reduce industry incentive to invest in rare disease drug development.

The President has not yet signed the tax bill into law because under current law, the significant increase in the debt from the legislation triggers automatic cuts to federal entitlement programs, including an estimated $25 billion cut to Medicare spending, which would go into effect in January 2018, unless Congress can enact a measure to waive pay-as-you-go budget requirements. A pay-go waiver is included in the short-term fiscal year 2018 government spending measure that the House is scheduled to vote on shortly. If Congress fails to pass the waiver, the President could simply wait until January 2018 to sign the tax bill into law, which would also defer the entitlement cuts. But regardless, neither the waiver nor the delay in signing the tax bill is a permanent fix to the entitlement cuts, as either action would simply delay the cuts until January 2019.

Last Reviewed: December 22, 2017