The Congressional Budget Office (CBO) released their analysis of the H.R. 1628, American Health Care Act of 2017 (AHCA). As we have been informing our clients since the introduction of this legislation, this is not a health care bill, it is a tax bill that happens to discuss and change health care coverage. However, the impact on health care for many Americans will be substantial. For this blog, we will only focus on the tax implications, which we believe to be the primary motivation for the version of AHCA that passed the US House of Representatives and will be sent to the Senate for consideration.
Looking at the analysis provided by the CBO (above), it is clear that the reduction of the costs of Medicaid and tax credits are utilized to offset the “noncoverage provisions” which consist mainly of taxes on high net worth individuals and fees assessed to specific industries.
So, what does AHCA mean for your business? Here are some changes you should know if this bill becomes law:
- The small employer tax credit for employee health insurance expenses are prohibited for health plans that cover abortion and is repealed for taxable years beginning after December 31, 2019.
- The penalties for certain large employers who do not offer full-time employees and their dependents minimum essential health coverage under an employer-sponsored health plan is repealed for months beginning after December 31, 2015.
- HSA, MSA, and FSA account restrictions will be eased to allow for the purchase of over the counter medicine not prescribed by a doctor.
- Employers who provide Medicare-eligible retirees with qualified prescription drug coverage and receive federal subsidies for prescription drug plans can claim a deduction for the expenses without reducing the deduction by the amount of the subsidy.
- The implementation of the excise tax on high cost employer-sponsored health coverage, commonly referred to as the “Cadillac tax” is delayed until 2026 (currently set to begin in 2020).
So, what does this mean for your personal taxes:
- Taxpayers can claim an itemized deduction for unreimbursed expenses medical expenses that exceed 5.8% (10% under current law) of adjusted gross income.
- The additional Medicare tax (0.9%) that is imposed on certain employees and self-employed individuals with wages or self-employment income above specified thresholds is repealed.
- The penalties for individuals who do not have minimum essential health coverage is repealed for months beginning after December 31, 2015.
These changes, with the exception of the small employer tax credit for employee health insurance, are cost reductions for taxpayers and businesses that are currently subject to these provisions. This bill has currently only passed in the House and would be required to be passed by the Senate and signed by the President to become a law.
Contact us now for a customized analysis to understand how these changes would impact your business!
Sources:
https://www.cbo.gov/publication/52752
https://www.congress.gov/bill/115th-congress/house-bill/1628