A vendor selling Trump flags in advance of the presidential inauguration.
A vendor selling Trump flags in advance of the presidential inauguration. Bloomberg News

With the impending inauguration of Donald Trump and the swearing-in of House and Senate members, the ingredients are in place for the repeal and replacement of the Affordable Care Act. But while the goal to “repeal and replace” has been part of the GOP blueprint since last summer, the reality is that the goal line keeps being shoved farther into the distance.

“There are a lot of ideas, but ideas are not a bill. No one has come forward yet and said, ‘Here’s our bill,’ said Roger Harris, president of Padgett Business Services. “There is a consensus to repeal. Some think the replacement should be immediate, while some think it should be done over months or years -- the reality is that until you know what you’re replacing it with, the timing is secondary.”

“No one knows how long it will take,” said Garrett Fenton, a member at law firm Miller & Chevalier. “A lot of people expected that by the date of the inauguration, we might have one or a couple of plans with overlapping elements that the Republican caucus would coalesce around. They haven’t done that, and we aren’t any closer to knowing any details of what will be included in the new replacement plan.”

Among the ideas that are being floated in the talk of a replacement bill are tort reform, and allowing insurers to sell across state lines, Harris observed. “The thinking is that tort reform would cut the cost of the end product by lowering the cost to doctors of being sued. Allowing insurers to sell across state lines would increase competition, also decreasing the cost of insurance,” he said.

How it will be done

While the details may remain uncertain, a little more is known about the process, in that the budget resolution for the 2017 fiscal year has been passed, according to Fenton. “This kicks off the reconciliation process, which everyone expects will be used to repeal certain parts of the ACA,” he said.

The reconciliation process would allow the repeal of certain sections by less than the 60 votes required to overcome a filibuster, Fenton observed.

“But it’s limited to legislation which affects federal spending, revenue and the budget,” he said. “Many of the provisions affecting employers, insurers and individuals – the market reform provisions – cannot be repealed through the reconciliation process, so we already know that the entire ACA will not be repealed immediately.”

Provisions that are likely to be repealed include the Cadillac tax, the employer shared responsibility tax, the individual mandate, the annual insurer fee, and various other tax provisions relating to limits on the amounts that can be contributed to flexible spending, as well as taxes like the 3.8 percent tax on net investment income and the additional Medicare tax.

“The 3.8 percent tax on net investment income applies to capital gains, as well as interest and dividends,” said Tim Steffen, director of financial planning at advisory firm Baird.

“It also applies to rental income, the taxable portion of annuity payments, and income from passive investments in a business. Taxpayers who were already above the thresholds [modified adjusted gross income of $250,000 for joint filers, or $200,000 for single filers] for paying this tax have probably become accustomed to it by now, and its repeal may not have a dramatic impact on their investment portfolio,” he said. “However, taxpayers whose income hovered near, but just below, the threshold for paying the tax were more likely to work to avoid paying this additional tax. A repeal of this tax might be enough incentive to encourage investors to realize gains they had otherwise been deferring, or to structure their portfolio to generate more income than in the past.”

Hold on for now

Fenton’s advice for now is simply to “stay the course.”

“It’s very likely that this will change in the relatively near future, but the timeline isn’t entirely clear,” he said. “There’s no solid replacement proposal yet, and it’s not clear when repeal will take place. Trump has said that he wants the repeal and replacement to take place simultaneously. [Speaker of the House Paul] Ryan said that the replacement won’t be ‘in place’ until next football season. We don’t know what he means by ‘in place’ – does he mean enacted by then, or effective by then? And does football season include training camp?”

Harris agreed: “As of today, we have the same situation we had yesterday – nothing has changed. If you’re an employer with more than 50 full-time employees you still have to offer health insurance to our employees or pay a penalty. The rules are still the rules.”

Meanwhile, there are some changes to take note of for this filing season, according to Annie Schwab, tax manager at Padgett Business Services.

“The IRS will begin rejecting any 2016 Form 1040s that are ‘silent’ for information related to the individual mandate,” she said. “A silent return is one where Box 61 is not checked indicating full year coverage, Forms 8965 and 8962 are not included indicating that an exemption applies, or a premium tax credit was reconciled or a penalty payment is made.”

The due date for Form 1095-A is still Jan. 31, 2017, she noted. “However, the due dates for Form 1095-B and Form 1095-C have been extended to March 2, 2017. And the $100 per day penalty per employee on employers who reimburse workers for the cost of health insurance was voided by the 21st Century Cures Act.”

Roger Russell

Roger Russell is senior editor for tax with Accounting Today, and a tax attorney and a legal and accounting journalist.