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Obamacare Repeal Is Back: Senate Gears up for Final 2017 Repeal Push

(Parker Tax Publishing September 2017)

Over the past two weeks, momentum has been building among Senate Republicans to make a final attempt to repeal the Affordable Care Act ("Obamacare") before the federal government's fiscal year ends on September 30 (realistically, the last day in 2017 the Senate could pass a bill on a party-line vote). The bill under consideration, Graham-Cassidy, would retain many of Obamacare's taxes and regulations, but would radically restructure its premium subsidies. Graham-Cassidy is generally considered to be the only viable Senate healthcare proposal left standing after the chamber voted down three other bills in July.

Like the healthcare bill that passed the House in May (AHCA; "House bill"), Graham-Cassidy eliminates the individual and employer mandates, repeals the medical device tax, and delays implementation of the "Cadillac tax" on high-cost employer-sponsored health plans until 2026.

Observation: Unlike the House bill, which replaces the individual mandate with a 30 percent health insurance premium surcharge on individuals who allow their coverage to lapse, Graham-Cassidy does not provide any incentives for individuals to maintain continuous coverage. The omission is similar to the one in the Better Care Reconciliation Act (BCRA), the since-defeated Senate healthcare introduced last June. Senate leadership dealt with the earlier omission by adding provisions to the BCRA requiring individuals to wait six months to obtain new health insurance after a coverage lapse. There's no indication that a similar change to Graham-Cassidy is in the offing.

Similar to the House bill, the Graham-Cassidy bill ostensibly retains Obamacare's insurance regulations, including standards for "essential health benefits" that insurers must cover and protections for individuals with preexisting conditions - but potentially undermines them by making it easier for states to obtain waivers. Other features common to the House and the Graham-Cassidy bills include provisions that would allow insurers to charge older individuals five times more than younger ones (compared with three times under current law), and sharp reductions in Medicaid funding beginning in 2020.

Where the two bills depart the most sharply is in their handling of Obamacare's key funding sources, and in how they subsidize the purchase of health insurance on the individual market.

The House bill would repeal the net investment income tax (NIIT) and the 0.9% additional Medicare tax in 2017 and 2023, respectively. Graham-Cassidy would keep both taxes.

Both bills would retain Obamacare's means-tested premium tax credit through 2019 with minor adjustments. After that, the House bill would replace it with a new, less generous, age-based credit. Graham-Cassidy, by contrast, would eliminate the federal credit altogether, and replace it with a seven-year block grant program. The program would allow states to implement their own subsidies by using the federal funds for any combination of six approved purposes, ranging from establishment of high-risk pools and/or reinsurance programs, to providing direct assistance to people purchasing health insurance on the individual market.

The Congressional Budget Office (CBO) has not yet scored the Senate's healthcare plan. An estimate is expected the week of September 25.

It's too soon to know whether Senate Republicans will have the 50 votes they'll need to pass the bill, after falling one short on the "skinny repeal" bill in July. Of the three Republicans who helped send that measure to defeat, Susan Collins (R-ME) and Lisa Murkowski (R-AK) have yet to state their position on Graham-Cassidy; John McCain (R-AZ), a close friend of bill sponsor Lindsey Graham, has voiced tentative support. Rand Paul (R-KY), who voted for skinny repeal but against BCRA, has said that he's a hard "no".

Senate leadership has indicated that they will only bring the matter to a vote if they have the votes to win passage.

Disclaimer: This publication does not, and is not intended to, provide legal, tax or accounting advice, and readers should consult their tax advisors concerning the application of tax laws to their particular situations. This analysis is not tax advice and is not intended or written to be used, and cannot be used, for purposes of avoiding tax penalties that may be imposed on any taxpayer. The information contained herein is general in nature and based on authorities that are subject to change. Parker Tax Publishing guarantees neither the accuracy nor completeness of any information and is not responsible for any errors or omissions, or for results obtained by others as a result of reliance upon such information. Parker Tax Publishing assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect information contained herein.

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