Kilpatrick

Industry News

Congress Passes Tax Reform

On December 20, 2017, congress passed the Tax Cuts and Jobs Act that in addition to making far reaching changes to the individual and corporate tax provisions, has major ramifications for the Affordable Care Act. This post will discuss the impact to the individual mandate and will leave the tax discussion to others.

The bill includes an effective repeal of the individual mandate requiring individuals to purchase and maintain health coverage. As this act was passed under the reconciliation process it only required a simple majority in the Senate. However, to be considered for reconciliation, the bill needed to address budgetary items only. For that reason, the bill repeals the individual mandate by zeroing out the penalties for non-compliance. This means that while the mandate remains in the law there is no tangible penalty. A future congress may re-institute a penalty, but for the time being the individual mandate is effectively no more.

The bill’s intent with regard to the individual mandate is set to go into effect in 2019. If the bill were to be signed in 2017 the penalties could be reduced for 2018, however, to do so would also trigger Medicare spending cuts in 2018 under PAYGO. PAYGO, or “pay-as-you-go”, is budgetary law that requires spending cuts to Medicare and other programs if legislation is passed that is projected to add to the deficit. This would mean congress could be forced to pass a PAYGO waiver as early as next month to avoid the cuts. This measure would have to be passed under regular order, meaning it would have to pass with 60 votes in the senate. This is highly unlikely given no democrat voted for the bill. This would set up another showdown the republicans may be anxious to avoid.

So, what does this mean for the individual mandate in 2018? Since the bill is not likely to be signed in 2017 this means any individuals that do not carry health insurance under current ACA requirements will remain subject to penalties through 2018.

Some of your clients may think that since the individual mandate has been repealed that the ACA is repealed in its entirety. This is not the case. All other aspects of the ACA remain in force. Do not allow you clients to cease any efforts to comply with the ACA, including ACA reporting due in early in 2018.

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