Open enrollment for purchasing 2017 health plans on the Marketplace ends January 31. In the meantime, Congress and President Trump have been paving the way to unwind and recalibrate the Affordable Care Act, a massive chunk of (largely) tax legislation.
Trump concluded his first day on the job by signing an Executive Order stating that, pending repeal of the ACA:
It is imperative for the executive branch to ensure that the law is being efficiently implemented, take all actions consistent with law to minimize the unwarranted economic and regulatory burdens of the Act, and prepare to afford the States more flexibility and control to create a more free and open healthcare market
The Order goes on to urge the responsible agencies to:
exercise all authority and discretion available to them to waive, defer, grant exemptions from, or delay the implementation of any provision or requirement of the Act that would impose a fiscal burden on any State or a cost, fee, tax, penalty, or regulatory burden on individuals, families, healthcare providers, health insurers, patients, recipients of healthcare services, purchasers of health insurance, or makers of medical devices, products, or medications.
What is the impact of this Order? Does it mean that individuals who did not have insurance in 2016 or large employers who did not offer insurance in 2016 will not have to pay their respective “shared responsibility payments” (i.e. penalty taxes)? Although it remains to be seen exactly how the agencies will respond, the President does not have the authority to implement wide-sweeping changes to the law through executive action. And the Order specifically states that it must be construed and implemented “consistent with applicable law,” including the requirements of the Administrative Procedure Act.
What the Order does do is signal a clear executive intent to dismantle and replace the Affordable Care Act as soon as possible. It also means that where there is discretion, the agencies will likely side with the taxpayer. One example of this discretion applies to the individual shared responsibility payment, which is detailed in IRC § 5000A. The statute sets forth what constitutes minimum essential coverage, when that coverage is considered unaffordable, and when a taxpayer is exempt from the penalty because of conditions such as incarceration. The law then grants discretion to the Secretary of Health and Human Services with respect to a general “hardship” exemption. No penalty is to be assessed against:
Any applicable individual who for any month is determined by the Secretary of Health and Human Services under section 1311(d)(4)(H) to have suffered a hardship with respect to the capability to obtain coverage under a qualified health plan.
In light of the Order, it is likely that such exemptions may be more freely granted. The Order would not seem, however, to give the Secretary of the Treasury the authority to refuse to assess and collect the shared responsibility penalty if no exemption has been granted. It is already the case that enforcement of the penalty occurs primarily through withholding refunds due. Congress did not grant the Secretary the authority to file liens or impose criminal sanctions against nonpayers.
Another potential impact of the Order would be to encourage IRS to waive the harsh excise penalty imposed on employers who offer group health plans that don't comply with ACA requirements. IRC 4980D allows the Secretary to "waive" this penalty if the failure was due to "reasonable cause" and the penalty seems "excessive."
Because no law has changed, taxpayers should continue to follow the provisions of the ACA (including published IRS guidance) and not rely upon a potential administrative waiver or exemption.
For their part, a majority in Congress also seem intent on repealing and replacing the Affordable Care Act. How exactly this will play out is also uncertain. Earlier this month (before Trump took office), Congress passed a budget reconciliation resolution directing House and Senate committees to prepare legislation to repeal the ACA. Such legislation would require only a bare majority of votes for passage. Replacement legislation, however, would be subject to filibuster unless 60 Senators voted in its favor.
Yesterday, Senators Cassidy and Collins introduced S. 191, a potential replacement to the ACA designed to perhaps appeal to a broader constituency. Interestingly, this bill would allow states that wish to keep their Affordable Care Act plans to keep them. Various legilsators have floated other options for replacement plans during the past months. Debate will certainly be interesting.
Although this flurry of activity should not greatly impact the 2017 filing season, the 2018 season may be a whole different ballgame.
We’ll keep you posted!
CALT does not provide legal advice. Any information provided on this website is not intended to be a substitute for legal services from a competent professional. CALT's work is supported by fee-based seminars and generous private gifts. Any opinions, findings, conclusions or recommendations expressed in the material contained on this website do not necessarily reflect the views of Iowa State University.