Industry Groups Push for Repeal or Delay of Two Affordable Care Act Taxes

By Michelle Hackman Features Dow Jones Newswires

Industry groups are ramping up a campaign to repeal or delay two Affordable Care Act taxes that have critics in both parties, the latest effort to tackle the health-care system following the collapse of the broad Republican push to repeal the Obama-era law.

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The taxes, one on medical devices and another on health-insurance plans, were previously delayed in late 2015. They now are set to take effect beginning in 2018, unless Congress postpones them again or kills them off entirely.

While many Republicans and some Democrats agree the levies should be jettisoned, they fear that tying the taxes' demise to other legislation could hold up more pressing congressional priorities and potentially reopen a larger fight over repealing parts of the 2010 health-care law, according to congressional aides and others familiar with the discussions.

"This is less a matter of going back to the divisive issue of partisan repeal and more a matter of going back to a bipartisan play that has already been drawn up and successfully executed before," said Dave Schnittger, a senior policy adviser at law firm Squire Patton Boggs who is involved in the effort to repeal the health-insurance tax and worked for former Speaker John Boehner (R., Ohio).

The medical-device tax levies a 2.3% charge on the sale of many medical devices, and is paid by manufacturers and importers. Device makers say the tax would stifle innovation, while their critics say they want an unfair exemption to the taxes the ACA imposes on many parts of the health-care industry.

The health-insurance tax, in turn, functions as a sales tax on coverage, paid by insurance companies. Insurers say this tax would sharply accelerate premium increases, but critics say it is a reasonable levy given the benefits insurers get from the ACA, including many new customers.

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Paul Van de Water, a senior fellow at the liberal Center on Budget and Policy Priorities, said the taxes were designed to apply to industries that would see increased business under the ACA. If any are repealed, he said, lawmakers would need to find other ways to fund the law's premium subsidies and other expenses.

"No one ever likes taxes," Mr. Van de Water said. "Once you start chipping away at one of these industries, then other industries will begin to ask, 'We should also renegotiate our part of the arrangement.'"

Business groups, including the Advanced Medical Technology Association and the U.S. Chamber of Commerce, are pushing lawmakers to attach a two-year delay of one or both taxes to one of several must-pass bills in September.

In particular, industry officials have suggested combining action on taxes with an effort by Sens. Lamar Alexander (R., Tenn.) and Patty Murray (D., Wash.) to authorize a set of ACA subsidies known as cost-sharing reduction payments, which are widely considered crucial for the continued functioning of the individual insurance market.

But Mr. Alexander opposes their inclusion, fearing it could prompt Republicans to demand that the bill repeal other ACA provisions, an aide said. Delaying either tax would also require lawmakers to seek a formal cost estimate from the nonpartisan Joint Committee on Taxation, a process that would set back the legislation's timeline.

Some Republicans are also opposed to including any of the ACA's taxes in an overhaul of the tax code, fearing in part that action on two of the law's least popular levies would reduce the incentive to repeal other ACA-imposed taxes in the future.

GOP lawmakers are now eyeing legislation to fund the popular Children's Health Insurance Program as a possible legislative vehicle, aides said, since the program's current funding will likely run out by December and must be renewed.

Officials in the medical-device industry say they feel encouraged by the bipartisan criticism of the device tax. Repeal efforts have gathered several prominent Democratic supporters, including Sen. Amy Klobuchar of Minnesota and Rep. Kyrsten Sinema of Arizona, generally from areas where many medical-device makers are located.

A bipartisan group of House lawmakers this summer recommended repeal of the tax in a larger package of health-care proposals. Suspending the tax for two additional years would carry a relatively small price tag, with the Joint Committee on Taxation pegging the cost at $3.4 billion in lost revenue.

"This isn't a blue state or red state issue, it's a jobs and innovation issue," said Scott Whitaker, president of the Advanced Medical Technology Association.

The push against the health-insurance tax, which would bring in more than $100 billion over a decade, is more uncertain. The measure to kill it enjoys less widespread Democratic support, in part because the assessment on health premiums makes up a larger proportion of ACA spending.

Health insurers strongly oppose the tax, but they have been focusing their lobbying efforts on guaranteeing the cost-sharing subsidy payments.

The push has instead fallen to a band of trade associations calling themselves the Stop the HIT Coalition, who argue the tax will result in higher costs for consumers. The Chamber of Commerce, a coalition member, plans to launch a six-figure digital media campaign urging Congress to repeal the tax.

"I think we need to shift to 'what can we do in the interim to stabilize the insurance market?'" said Neil Bradley, the chamber's senior vice president. "Clearly if the concern is premiums, one of those things is a continued suspension of the health insurance tax."

According to a study by the consulting firm Oliver Wyman, families who receive health coverage through small and large employers would see an average premium increase of about $500 in 2018 as a result of the tax.

Write to Michelle Hackman at Michelle.Hackman@wsj.com

(END) Dow Jones Newswires

September 05, 2017 15:08 ET (19:08 GMT)