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This week, tax proposals with important implications for health insurance advanced in both Congressional chambers. On Nov. 16, the House of Representatives passed tax reform legislation by a vote of 227 – 205. The current version of the House tax bill includes a health-related provision specifically, elimination of the orphan drug tax credit and of the medical expenses tax deduction. While the House Republican Leadership considered including a repeal of the ACA mandate in the House bill, the clear House Republican leadership message was, “the Senate must act first on the ACA mandate repeal.” 

The Senate Republican Leadership appears to have accepted the House challenge and the Senate Finance Committee passed its version of the tax bill that includes an effective repeal of the ACA individual insurance mandate. Unlike the House bill, the Senate bill does not include provisions to repeal the Orphan Drug tax credit or the medical expenses deduction.

According to the Congressional Budget Office, if enacted into law, elimination of the individual insurance requirement would have significant effects on the health insurance market including:

• 13 million additional American’s losing health insurance;
• higher premiums, deductible and copays for those who remain in the insurance market; and
• destabilization of the private insurance market through adverse selection of healthy vs. sick consumers.  

Although the individual mandate repeal passed the Senate Finance Committee, it is not yet clear if the provision will survive as the bill moves to Senate floor votes, scheduled to begin the last week of November; at least one Senate Republican, Sen. Collins, has expressed concern over its impact.

The House tax bill’s repeal of the orphan drug tax credit will face opposition from the Senate Orphan Drug Act sponsor, Sen. Orrin Hatch (R-UT), making this another negotiating issue between the House and Senate versions of the bill. The orphan drug tax credit is aimed at incentivizing the development of therapies for rare diseases by giving drug companies a tax credit for 50 percent of the cost of clinical trials. Since the orphan drug tax credit’s creation in 1983, the Food and Drug Administration has approved 451 orphan drugs for 590 rare disease indications such as Ivacaftor for cystic fibrosis.

The House tax bill’s elimination of the medical expenses tax deduction could impact some people with costly health conditions. The current medical deduction allows people to deduct medical expenses that exceed 10 percent of their total income. According to the Joint Committee on Taxation, about 9 million Americans use this deduction and over half are over the age of 65.

The ATS sent a letter to both the House and the Senate opposing the ACA individual mandate repeal provision.