College of Law > Academics > Centers, Institutes & Initiatives > Mary and Michael Jaharis Health Law Institute > e-Pulse Blog > Financial Implications of Repealing the Affordable Care Act

Financial Implications of Repealing The Affordable Care Act

During his first major news conference since Summer 2016, President Donald Trump stated the new administration will “propose specific language for both repealing key provisions of Obamacare and replacing it with a new Republican-style health insurance program.”  This news conference took place only a few days after the Senate confirmed Rep. Tom Price (R-GA) as the Secretary of Department of Health and Human Services.  The Affordable Care Act (ACA) “is financed by a combination of tax increases on individuals and businesses, Medicare tax increases and cost savings measures, among others.”  Thus far, no replacement plan has been widely supported by either party.  This bi-partisan support is crucial in order for replacement legislation to be enacted.  Although the Trump administration lacks a clear replacement plan, those tax increases under the ACA could be done away with as a result of the repeal.  

Financially speaking, the repeal of the ACA would impact the elite, middle, and lower income Americans. Congressional aides for Republican Senators and House Representatives have stated that dismantling the ACA will be easily accomplished by “passing a budget resolution protected from a filibuster in the Senate under special budget reconciliation rules.”  If the Affordable Care Act is repealed, it could take as long as two years to enact replacement legislation.  However, the Speaker of the House, Paul Ryan, has indicated that the ideal situation would be to implement replacement legislation as quickly as possible following the repeal of the ACA.  There is “evidence show[ing] that the individual [state] markets are becoming more stable.”  By dismantling the ACA, these individual health markets could begin to fall into a death spiral, where “healthier people leave the pool with health coverage, pushing up premiums for remaining enrollees, who cost more to cover.”  By eliminating the individual mandate, approximately 4.3 million people would lose their insurance coverage in 2017.  If individuals lose their coverage, insurers would also suffer significant financial losses, thus leading insurers to “either pull out of the market for the following year or raise premiums significantly.”

A recent study “focused on two [ACA] taxes that target the wealthiest households in the country but have virtually no effect on middle and lower-income Americans.  One is a 0.9 percent federal Hospital Insurance tax increase on individuals who have incomes above $200,000 and couples with incomes more than $250,000.  The other is a 3.8 percent Medicare tax on ‘unearned income’ that wealthier Americans receive from capital gains, dividends, and royalties.”  After cutting the Affordable Care Act, “the top 400 highest-income tax payers – [those] with average annual incomes of more than $300 million each -- would receive an estimated $7 million as a part of the repeal.”  The Treasury would lose $2.8 billion per year in tax revenue as a result.  Households making less than $200,000 would receive nothing from the repeal on the two taxes.  Approximately seven million​ “low-and-moderate income families that currently qualify for the health insurance premium tax credits under the federal tax code” would face higher taxes as a result of the repeal.

Kate Reynolds is currently a 3L at DePaul University College of Law. Ms. Reynolds completed her undergraduate degree at the University of Illinois Springfield. Ms. Reynolds wishes to pursue a career in Health Law after graduating in May.