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House Republicans propose replacing ACA with tax credit

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Tax Hot Topics | House Republicans propose replacing ACA with tax creditHouse Republicans released a task force report last week that recommended repealing the Affordable Care Act (ACA) and replacing it with a refundable tax credit to assist individuals in buying insurance on the open market.

The tax credit would be largely paid for by capping the exclusion from income of employer-provided health care. A similar cap was originally considered before the ACA was enacted, but the “Cadillac” excise tax on high-cost health plans was ultimately considered a more politically palatable option. The Cadillac tax has turned out to be universally unpopular, and its original effective date has been delayed from 2018 to 2020.

The Republican plan seeks to repeal all the tax provisions originally enacted as part of the ACA, including the Cadillac tax, the employer and individual penalties, the industry fees and excise taxes, and the 3.8% net investment income tax.

The refundable tax credit under the plan is meant to be available to individuals who don’t receive employer coverage and aren’t covered by Medicare or Medicaid. The plan also recommends expansions to heath savings accounts and would make other changes to encourage risk pooling in insurance markets.

The report emerged out of one of six task forces created by House Speaker Paul Ryan, R-Wis. Each task force was charged with creating a report in advance of the Republican National Convention next month.

The health care report is more a statement of policy objectives. It is relatively light on details and doesn’t offer legislative language or cost estimates. It can be viewed largely as a campaign platform rather than a concrete legislative proposal.

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