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ACA Individual Mandate Repealed in 2019 Under Tax Reform Bill

Marshall & Sterling E-Alerts - Keeping You in the Know

On December 20, Congress passed the Tax Cuts and Jobs Act, which makes substantial changes to individual and corporate provisions of the U.S. tax code. The bill includes permanent effective repeal of the Affordable Care Act’s individual mandate, which requires individuals to purchase and maintain health coverage, by zeroing out the penalty beginning in 2019.

The Congressional Budget Office (CBO) estimates that about 13 million fewer people will be insured by 2027 without the mandate. The CBO also estimates that average premiums will rise 10% as healthier individuals exit the risk pool leaving the costliest enrolled.

For 2018, most individuals are still required to maintain coverage or pay a penalty when they file their 2018 federal income tax return. Many provisions of the ACA, including the employer mandate, remain unchanged by the bill.

The bill was negotiated by a conference committee comprised of representatives from both the Senate and House after each chamber passed their own versions of tax reform. The final bill was passed 51-48 by the Senate and 224-201 by the House before being sent to the President. President Trump is expected to sign the bill into law soon.

The bill also changes how certain tax thresholds will be indexed for inflation. Affected provisions, including the ACA “Cadillac” Tax (scheduled to take effect in 2020), will now be indexed to the Chained Consumer Price Index (CPI) instead of the previous metric—the regular CPI, which means thresholds will be increased at a much slower rate. That change makes it likely that more employer-sponsored plans will trigger the Cadillac tax sooner.

Marshall & Sterling will provide you with additional information as it becomes available. Please do not hesitate to reach out with any questions, comments, or concerns.