After failing this year to repeal and replace Obamacare, House Republicans are angling to put taxes that are part of the health law on hold.
Measures proposed in the House Ways and Means Committee on Tuesday would cut some Affordable Care Act taxes for health insurers, drugmakers and medical-device makers. Patients, too, would benefit from the changes, which are likely to be attached to an end-of-year spending bill.
Lawmakers want to delay for another two years an annual fee that health insurers must pay based on market share. The fee, which insurers have passed on to consumers by raising premiums, was delayed in 2017 but set to take effect once again in 2018, leading insurers to include it in next year’s rates. A bill introduced by Republican Kristi Noem of South Dakota would extend relief from the tax for another year for insurers who give patients rebates. The tax cut would continue through 2019.
Big insurers have the most to gain from the proposed changes as they pay the highest fees, said Michael Newshel, an analyst at Evercore ISI. In 2016, the industry paid $11.3 billion in total fees. Payments included $1.8 billion from UnitedHealth Group Inc., $1.2 billion from Anthem Inc. and $916 million from Humana Inc., according to company filings.
Congress hasn’t specified how the rebate will be treated on company tax forms, so Newshel said there could be a one-time earnings boost in 2018 if insurers were allowed to treat the rebate to consumers as a deductible expense.
Even if the tax relief is temporary, “the expectation would be for Congress to either continue kicking the can down the road beyond 2019 or eventually permanently repeal the fee,” Newshel said.
Another proposal would extend a delay on the 2.3 percent medical-device tax for another five years to 2022, which would potentially boost device makers’ profit margins.
There is bipartisan support for the repeal of the health-insurer fee and device tax, Newshel said, but Republicans and Democrats have largely disagreed over how to pay for the cuts. Brian Rye, a health-care analyst with Bloomberg Intelligence, said the offsets would be less of an issue if lumped into a broader Obamacare repeal.
Republicans leaders have said they won’t include these measures in the separate tax-overhaul bill, so Congress will likely roll the changes into a spending bill they must pass before Dec. 22 to avert a shutdown of the federal government.
Rye said the tax relief would be “positive for the bottom lines of all involved,” but added that the impact would be less felt for insurers, who already passed the buck onto their consumers.
The committee also proposed putting an over-the-counter drug tax on hold for 2018 and 2019, and to provide retroactive relief for the past three years and next year from the so-called Cadillac tax, which taxes companies for high-cost employer health plans. Lawmakers also want tax relief for health plans regulated by Puerto Rico.