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Yesterday, the House of Representatives passed the American Health Care Act (AHCA) in a narrow vote of 217 to 213 after the bill had been amended from its previous version proposed a few weeks earlier. The AHCA is new proposed legislation that will repeal and replace parts of the Affordable Care Act (ACA) which is currently the law of the land. While this is only the first step of the new legislation, here are a few of the highlights contained in this new bill.

What is repealed: 

  • Individual mandate - effective 2016 
  • Employer mandate - effective 2016
  • Income based subsidies - effective 2020
  • Net investment tax (3.8% on passive income)
  • 10% floor on medical in itemized deductions (reduces to 5.8% floor) 
  • "Cadillac tax" delayed until 2026
  • Medical device tax
  • Small employer health insurance credit effective 2020
  • Exclusion from over the counter medication from FSAs and HSAs - effective 2017
  • Other smaller tax type provisions originally imposed by ACA

What is replaced: 

  • Gives states the ability to define essential coverage (through waivers) and encourage fair health insurance premiums by allowing states to establish "high risk pools" and apply for waivers from federal standards in an effort to lower premiums and expand the number of insured
  • Refundable tax credit for individuals carrying coverage based on age (phased out based on income) 
    • Starting at a $2,000 credit for those under 30 and,
    • Ending at a $4,000 credit for 60 and older
  • 30% premium increase for individuals for one year for those whom have not maintained coverage over the previous year (can't come and go) - effective 2019
  • HSA and FSA enhancements

What stays:

  • Coverage for children up to age 26
  • Maintains pre-existing conditions but could be tied to "high risk pools"
  • Guarantee of ability and renewal of coverage
  • Keeps the additional .09% Medicare surtax on earned income over (200k single and 250k joint) until 2022

The AHCA now moves to the Senate where most likely there will be some changes and negotiations with the House before a bill is finalized and sent to the President for signature. Until that time, the current Affordable Care Act is still law, and employers and individuals alike must adhere to the rules and regulations currently in effect.

The passage of the AHCA could have a large impact on the tax reform as well. It has been reported that potential savings from the AHCA would help fund a more robust tax reform package.

To answer questions surrounding the current ACA rules or discuss long-term tax strategies for the proposed legislation, contact your local UHY LLP professional.