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November 15, 2017

Health reform is back—this time, via tax reform

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    Senate Republicans on Tuesday unveiled a modified version of their tax reform bill that would effectively repeal the Affordable Care Act's individual mandate, which requires most people to purchase insurance coverage or pay a fine.

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    According to Politico, Republican senators discussed the change, which is supported by President Trump, during a closed-door lunch meeting.

    Individual mandate changes

    The modified bill, which Senate Finance Committee Chair Sen. Orrin Hatch (R-Utah) revealed late Tuesday, would eliminate the individual mandate's fines for failing to purchase coverage beginning in 2019. According to Politico, the bill under the Senate's budget reconciliation rules cannot technically repeal the mandate, but senators can render it ineffective by changing the fines to $0. 

    The Congressional Budget Office (CBO) last week projected that eliminating the individual mandate would result in 13 million more uninsured U.S. residents and save the federal government $338 billion from 2018 to 2027, largely because the government would pay less in subsidies to help low-income individuals purchase insurance.

    Hatch said those savings would give Republicans more financial flexibility in their tax reform efforts. Under the budget resolution that allows the bill to pass via the Senate's reconciliation process, the tax reform bill cannot increase the federal deficit by more than $1.5 trillion over the next decade.

    Hatch said, with the additional revenue from eliminating the individual mandate, Republicans were able to further lower the individual tax rates for three middle-income tax brackets and make permanent a corporate tax cut. Under the revised bill individual incomes for the third, fourth, and fifth income brackets would fall to 22%, 24%, and 32%, respectively—though the new individual tax rates across all seven of the bill's brackets would be temporary, expiring after 2025.

    Industry stakeholders, Democrats push back

    A coalition of health care industry groups in a letter Tuesday urged House and Senate leaders not to eliminate the ACA's individual mandate, The Hill reports.

    The letter was signed by six major health groups:

    • America's Health Insurance Plans;
    • American Academy of Family Physicians;
    • American Hospital Association;
    • American Medical Association;
    • Blue Cross Blue Shield Association; and
    • Federation of American Hospitals.

    The groups wrote, "There will be serious consequences if Congress simply repeals the mandate while leaving the insurance reforms in place: millions more will be uninsured or face higher premiums, challenging their ability to access the care they need." They added that "repealing the individual mandate without a workable alternative will reduce enrollment, further destabilizing an already fragile individual and small group health insurance market on which more than 10 million Americans rely."

    Democrats also criticized the move. Sen. Ron Wyden (Ore.), the top Democrat on the Finance Committee, said, "In their desperation to secure an ideological trophy, no matter the consequences, Republicans are choosing to pay for corporate tax cuts by raising premiums for middle class families and ripping away health care altogether from millions more."


    After Tuesday's meeting, Senate Majority Leader Mitch McConnell (R-Ky.) said, "We're optimistic that inserting the individual mandate repeal would be helpful" to passing tax reform.

    Sen. John Thune (R-S.D.) expressed confidence that the bill would have enough votes to pass, saying, "It's been whipped."

    However, at least one Republican senator, Sen. Susan Collins (R-Maine), said including the individual mandate language "complicates" the tax effort. "My concern is that if we combine the health care issues with tax reform, we make it far more controversial," she said.

    To assuage such concerns, Thune said the Senate was considering passing the bipartisan compromise bill crafted by Sens. Lamar Alexander (R-Tenn.) and Patty Murray (D-Wash.) alongside tax reform. That bill would require Democratic support to clear a 60-vote threshold to passage.

    Senate Majority Whip John Cornyn (R-Texas) said, "My expectation is that Alexander-Murray would be part of Dec. 8 negotiations. That's still a work in progress, but I think that would be a good outcome."

    According to the Post, Murray was surprised by the inclusion of the individual mandate language. "The elections last week clearly showed that the American people are paying attention, and they don’t want their health care taken away," Murray said, adding, "I don't think (Republicans are) listening."

    However, Alexander said he believes "Republican support for the Alexander-Murray bill will be very strong" if GOP senators vote to eliminate the individual mandate.

    Next steps

    According to the Washington Post, the Senate Finance Committee plans to vote on the bill this week, aiming to advance the bill for a vote in the full Senate after Thanksgiving.

    However, the House and Senate versions of the tax reform bill include significant differences. For instance, the House measure does not include a provision to eliminate the individual mandate, and it would go further than the Senate's to reduce the number of individual tax brackets.

    According to the Post, House conservatives, including Republican Study Committee Chair Rep. Mark Walker (R-N.C.), sought to include language to eliminate the individual mandate in the House's bill, but GOP aides said leaders were not keen on making such a significant change to the bill before seeing if it could pass the Senate.

    The House bill is expected to reach the full floor for a vote Thursday, and according to the Associated Press, Trump plans to speak with House Republicans in person on the matter (DeBonis/Paletta, Washington Post, 11/14; Gordon, Associated Press, 11/15; Haberkorn et al., Politico, 11/14; Weixel, The Hill, 11/14; Carney, The Hill, 11/14).

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