HomeWashington Letter2017 ▶ Senate Passes Tax Bill with ACA Mandate Repeal; Differing House and Senate Bills Must Now Be Reconciled
Senate Passes Tax Bill with ACA Mandate Repeal; Differing House and Senate Bills Must Now Be Reconciled

In the early hours of Dec. 2, the Senate passed its tax reform bill by a slim partisan vote of 51 – 49, with Sen. Corker (R-TN), the lone Republican voting no on the bill alongside all Democrats. If enacted, the Senate bill would have a significant impact on the U.S. health care system as it includes a provision eliminating the Affordable Care Act’s individual health insurance mandate. According to the Congressional Budget Office, elimination of the individual insurance requirement would result in 13 million Americans losing health insurance by 2027, an estimated 10 percent increase in insurance premiums and potential destabilization of the private insurance market through adverse selection of healthy vs. sick consumers. 

The Senate bill also includes a measure that would significantly scale back the orphan drug tax credit, which incentivizes rare disease research. The measure would reduce by half the amount a tax credit that drug companies can receive for development of a new rare disease therapy.

The House passed its own version of a tax reform bill on Nov.16. The next step for tax reform is reconciliation of the substantial differences between the House and Senate versions of the bill through a House-Senate conference committee composed of key members of both chambers. The House bill did not include repeal of the individual insurance mandate although there is support for it among House Republicans and the President has strongly supported the repeal.

Among other differences between the two bills, the House bill would fully repeal the orphan drug tax credit as opposed to the Senate’s partial reduction of the credit. The House bill also eliminates the medical deduction that allows people to deduct medical expenses that exceed 10 percent of their total income. Finally, the Senate bill includes a measure that impacts some universities, specifically by imposing a 1.4 percent tax on endowment funds that exceed $500,000 per student.

Although the House and Senate conference committee has a substantial task in reconciling the House and Senate bills before Congress adjourns for the holidays, the President and congressional Republican leadership are urgently seeking a legislative “win,” so it is likely that a bill will be enacted.  At this point, repeal of the individual insurance mandate is likely to be included, which will have significant impact on the U.S. health care system, as described above.

The ATS sent a letter to the Senate last week opposing the ACA individual mandate repeal provision.

Last Reviewed: December 5, 2017