Updated Senate GOP Health Care Bill Retains Additional Medicare Tax and Most Health Coverage Reporting Rules

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July 13, 2017

This morning, Senate Republican leaders released an updated Better Care Reconciliation Act that would largely retain the existing health coverage reporting regime enacted as part of the Affordable Care Act (ACA). In contrast to the prior Senate bill (see prior coverage), the updated bill would keep in place the 3.8% net investment income tax, as well as the 0.9% additional Medicare tax, which employers are required to withhold and remit when paying wages to an employee over a certain threshold (e.g., $200,000 for single filers and $250,000 for joint filers). The updated bill is otherwise similar to the prior bill from a health reporting standpoint, as it would keep the current premium tax credit (with new restrictions effective in 2020) and retain the information reporting rules under Code sections 6055 and 6056. (The House bill passed on May 4, 2017 (discussed here and here), by contrast, would introduce an age-based health insurance coverage credit along with new information reporting requirements.) The updated bill would also zero out penalties for the individual and employer mandates beginning in 2016.

In addition to the ACA repeal-and-replace efforts in the Senate bill, the House Committee on Appropriations included in its appropriation bill a provision that would stop the IRS from using its funding to enforce the individual mandate or the related information reporting rule under Code section 6055 for minimum essential coverage (on Form 1095-B or 1095-C). This provision would be effective on October 1 this year. Apart from significantly cutting IRS funding, however, the appropriation bill would not otherwise affect IRS enforcement of information reporting by applicable large employers regarding employer-provided health insurance coverage. Thus, even if both the Senate health care bill and the House appropriation bill were to become law as currently proposed, applicable large employers would still be required to file Forms 1094-C and 1095-C pursuant to Code section 6056 in the coming years.