Tax Cuts and Jobs Act – Executive Summary

Quick Jump

I. Introduction
II. Repeal of the Individual Mandate
III. External Discussion and Analysis


I. Introduction

 

After failing to pass a comprehensive repeal of the Affordable Care Act (“ACA”) over the summer of 2017, Republicans turned to their next legislative priority: tax reform.  However, the tax bill, called the Tax Cuts and Jobs Act of 2017 (“TCJA”), did not represent a total abandonment of ACA repeal efforts because it contained provisions which effectively repealed the ACA’s individual mandate.  On December 20, 2017, the TCJA passed both the House and Senate, and two days later, President Trump signed the bill into law.

 

This article summarizes the TCJA’s effect on the healthcare industry.

 

For the full text of the TCJA, visit Congress’s website here.

 


II. Repeal of the Individual Mandate

 

The Tax Cuts and Jobs Act repealed the tax penalty linked to the individual mandate, starting in 2019. Unlike other provisions in the TCJA, repeal of the individual mandate would not sunset in 2025 but would be a permanent change to the law.  Republicans had two reasons for repealing the individual mandate penalty.  First, the law allowed the party to follow through on campaign promises to repeal at least part of the ACA.  Second, repealing the individual mandate would free up large sums of money needed to successfully pass their proposed tax cuts.

 

Note, however, that under the law, most individuals are still required to obtain health insurance; the TCJA merely removes the tax penalty for failing to do so.  Further, the individual mandate is still in effect for the 2017 and 2018 tax years, and those who fail to acquire coverage during these years will face the ACA’s steep penalty.

 

According to the CBO’s November 2017 report, repealing the individual mandate would decrease federal deficits by around $338 million from 2018 to 2027.  The projected savings from the repeal of the individual mandate is the result of a projected 4 million Americans losing insurance by 2019.  CBO predicts that, by 2027, 5 million individuals will lose their nongroup market coverage, 5 million will lose Medicaid coverage, and 3 million will lose employer-sponsored coverage, totaling 13 million additional uninsured Americans.  This will likely result in adverse selection on the individual market, increasing premiums by an average of 10% per year from 2018 to 2027.

 

Even as the Republican Party repeals the federal individual mandate, a growing number of states are considering the option of implementing their own health coverage mandates.  California, Maryland, and the District of Columbia are currently testing the waters, and more states are sure to follow.  Indeed, these states may look to Massachusetts’s mandate, upon which the federal mandate was based.

 


 

III. External Discussion and Analysis

 

With the Federal Individual Mandate Gone, States Might Step Up: Lessons from Massachusetts
Health Affairs Blog
January 16, 2018

 

The Tax Cuts and Jobs Act: Implications for Healthcare
Electronic Health Reporter
January 11, 2018

 

The Impact of Repealing the Individual Mandate Penalty
Mercer
December 20, 2017

 

Tax Bill Offers Mixed Bag as Congress Punts Other Health Issues to 2018
Mercer
December 20, 2017

 

The GOP Tax Bill Repeals Obamacare’s Individual Mandate. Here’s What That Means for You
Fortune
December 20, 2017

 

Mandate Repeal Provision Ends Health Care Calm
Health Affairs Blog
December 11, 2017

 

How States Can Save the Individual Mandate
Vox
December 8, 2017