Republicans may add ACA mandate repeal to tax bill

Eliminating the Obamacare component is seen as a way to pay for tax cuts, but its removal could cause instability in the health insurance market.

Despite repeated failures to repeal the Affordable Care Act earlier this year, Congressional Republicans may put the law’s individual mandate on the table as they refine a tax reform bill.

On Thursday, House Republicans laid out their tax plan. There was no mention of repealing the Affordable Care Act and the absence of any ACA language was seen by the healthcare insurance industry and employers as a sign of long-sought stability for healthcare policy. However, as lawmakers look for ways to reduce tax cuts’ impact on the deficit, the hundreds of billions in potential savings from killing the requirement that Americans buy insurance or pay a fine are tempting.

Today, Rep. Kevin Brady (R–Texas) told Politico that President Donald Trump “feels very strongly about including this [mandate repeal] at some step before the final process,” and has been calling him about it.

TaxReform.Bloomberg.jpgVarious legislators throughout the week floated the idea, first on Sunday when Sen. Tom Cotton (R–Ark.) tweeted, “Why repeal popular tax deductions when $300B available from mandate repeal?!” That was echoed by Trump on Wednesday when he said, also on Twitter, “Wouldn’t it be great to Repeal the very unfair and unpopular Individual Mandate in ObamaCare and use those savings for further Tax Cuts for the Middle Class. The House and Senate should consider ASAP as the process of final approval moves along.”

But removing the individual mandate – a key provision of the ACA – would cause instability in the health insurance marketplace and shift costs to employers and other stable health insurance customers.

And it would take a lot of work to pass a tax bill that eliminates the mandate. Many Republicans oppose combining the so-far unsuccessful goal of repealing the ACA with tax reform. Republicans are attempting to pass their legislation through reconciliation, which requires only a simple majority of Senators to succeed. Some have expressed concern that the impact on healthcare reform could sink that opportunity, because those efforts have not been able to reach 50 votes in the Senate.

"Importing healthcare into the tax reform debate has consequences, especially one where the Senate has yet to produce 50 votes on anything related to healthcare," Brady told Politico.

But to qualify for the Senate’s reconciliation process, the bill must meet the terms of an adopted budget resolution and adhere to rules developed by and named for the late Robert Byrd, the West Virginia Democrat who served as majority leader from 1987 to 1989.

The House plan proposed this week passes the first test. The fiscal 2018 budget resolution does not allow a tax bill to add more than a total of $1.5 trillion to deficits over 10 years, and the Joint Committee on Taxation’s initial assessment of the measure puts the bill’s cumulative shortfall at $1.41 trillion over a decade.

The red flag is raised after 2027. The nonpartisan joint committee’s analysis shows the plan adding $156 billion to the budget shortfall in that year, a sure sign that it will add to the deficit in 2028. That would trigger the Byrd rule, giving Democrats an opening to raise an objection to the bill on the Senate floor that would require 60 votes to overcome.

Finding as many savings as possible, therefore, is important to the Republicans’ efforts.

But insurers should watch out if repeal makes it into the final bill. The mandate is unpopular, but crucial to supporting coverage goals. For context, when Trump threatened to end cost-sharing reduction payments made to insurers earlier this year, Michael Consedine, the CEO of the National Association of Insurance Commissioners, said ending the subsidy payments will cost insurers at least $1 billion this year and boost premiums 12% to 15% on average next year.

The loss of revenue from healthier people not being required to buy insurance or pay into the system could be even larger. With insurers still subject to coverage requirements, insurers would have to raise premiums substantially, making coverage unaffordable to many consumers who need it the most and triggering a feared “death spiral” of rising premiums and smaller customer pools, without other changes to law.

Bloomberg News contributed to this report.

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