The new Tax Bill (H.R. 1), which President Trump is expected to sign soon, will have an impact on healthcare in the U.S.
First, the Tax Bill will permit a taxpayer to deduct medical expenses that exceed 7.5% of the taxpayer’s adjusted gross income (which has been reduced from the previously 10% threshold). This will allow more Americans to deduct their medical expenses.
Second, and more notably, the Tax Bill repeals the “individual mandate” under the Affordable Care Act (“ACA”), effective January 2019. While the repeal of individual mandate is estimated to reduce the Federal deficit—its impact on the health insurance market is difficult to estimate. Back in November of 2017, the Congressional Budget Office (“CBO”) reported that the repeal of the individual mandate would increase the number of uninsured Americans by 4 million in 2019 and 13 million by 2027. Additionally, the CBO projected that the repeal would likely increase average premiums by 10% in the individual insurance market. The CBO cited the fact that, without a tax penalty, fewer healthy Americans would purchase health insurance as the primary reason for these projections. The CBO also noted that the likely increase in premiums would further result in fewer insureds, especially in the individual insurance market, because the premiums would become less affordable. The Tax Bill leaves the ACA’s “employer mandate” and the corresponding employer reporting requirements untouched.
Interestingly, the Tax Bill did not repeal the Cadillac tax on health coverage or the medical device tax.
Venable’s Healthcare attorneys are happy to address any specific questions you may have on the Tax Bill’s effects on healthcare.