Washington – The Senate health care bill, called the Better Care Reconciliation Act, would roll back nearly $1 trillion in taxes imposed by the Affordable Care Act to expand coverage to the poor and middle-income individuals.
The tax breaks are diverse – ranging from those established on tanning salons to those on over-the-counter drugs. But analysts say 40 percent of the health bill’s rollback on taxes would benefit the top 1 percent of income earners in the United States.
That has given Democrats and other critics of the bill heavy ammunition to call the Better Care Reconciliation Act, or ”Trumpcare,” as it’s detractors call it, a giveaway to the nation’s wealthy at the expense of helping middle-class Americans purchase health insurance and cutting Medicaid, the government-run health program for the poor.
Sens. Richard Blumenthal, D-Conn., and Chris Murphy, D-Conn., said, “The bill would charge sick people more for health care, force millions of people to lose their health insurance, and prevent millions of people from accessing treatment for addiction amid the opioid crisis – all to pay for huge tax cuts for the wealthy.”
Most of the Senate’s tax breaks mirror those of a House-approved bill last month.
Both bills would eliminate in 2023 a 0.09 percent Medicare payroll tax surcharge imposed on those whose income exceeds $200,000 a year — $250,000 for married couples.
Under the Affordable Care Act, those high-income earners are also subject to an additional 3.8 percent Medicare tax surcharge on a portion of their investment income from capital gains, dividends, interest, rental income and annuities.
The repeal of the Medicare surtax is immediate, retroactive to Jan. 1 of this year. So if you sell – or already have sold — any stocks or other assets this year that have big long-term gains, you would not be subject to the surtax when you fill out your 2017 federal tax return next spring
Under the ACA, individuals can save up to $3,400 and families can save up to $6,750 in tax-free Health Savings Accounts. The Senate and House bills would raise that limit to the annual out-of-pocket maximum for high-deductible plans. For 2018, that would be $6,650 for individuals and $13,300 for families.
The bills also would end the ACA’s prohibition on paying for over-the-counter medications with funds from heath savings accounts, effective in 2018.
Other tax repeals include:
- The Affordable Care Acts tax on insurance policies, which insurers have passed along to consumers.
- Taxes on brand-name prescription drugs and medical devices.
- A 10 percent tax on tanning parlors.
- An excise tax on charitable hospitals that fail to comply with all provisions of the Affordable Care Act.
- An excise tax on individuals who fail to purchase health insurance. The House and Senate bills remove the penalty for those who don’t comply with the ACA’s “individual mandate” to keep themselves insured. Individuals were exempted from this Obamacare mandate if they had incomes that were too low to file a tax return.
- An excise tax on employers who do not offer adequate health insurance coverage to their employees. This tax applied to employers with 50 or more full time-equivalent employees.
The House and Senate bills, however, keep one of the ACA taxes. But like the ACA, the Republican plans to replace Obamacare delay the so-called “Cadillac tax” that imposes a 40 percent levy on generous employer health insurance plans.
Originally scheduled to go into effect in 2018, the law would have taxed employers on any premiums that exceed $10,200 for individual policies and $27,500 for family plans. A pushback from unions and large employers resulted in a delay of the start date to 2020. The Republican health care plans delay that start date to 2026.
Both House and Senate bills have a tax break for insurance executives.
To help pay for the Affordable Care Act’s benefits, the deductability of insurance executive pay was capped at $500,000. For executives in other industries, it is $1 million — not including stock options and other forms of compensation that often form the bulk of executive pay.