March 24, 2017 Reading Time: 2 minutes

President Trump demanded that the House vote on the American Health Care Act today. It is not certain if the American Health Care Act will pass. The House Freedom Caucus, an important conservative voting bloc, is not on board. If the American Health Care Act passes it will roll back much of President Obama’s signature health care law.

The House Republicans introduced the American Health Care Act last week. The American Health Care Act would eliminate much of the Affordable Care Act, otherwise known as Obamacare. Under Obamacare, premiums have risen, deductibles have moved higher, and health insurance options have diminished. The American Health Care Act seeks to lower costs.  

The Republican plan would eliminate the Obamacare mandates. Obamacare mandated consumers to purchase health insurance or pay a penalty tax. The mandate led many consumers to purchase health insurance that did not meet their needs. The American Health Care Act would not require individuals to purchase health insurance. The American Health Care Act would also drop the employer mandate. The employer mandate required that employers with 50 or more full-time employees to provide health insurance.

Including the individual mandate and the employer mandate, Obamacare created 21 new taxes. According to the Tax Foundation, The American Health Care Act would eliminate most of the Obamacare taxes. Major taxes that would be eliminated include the net investment income tax, a tax on prescription drugs, the Medicare tax, and a tax on the health care insurance industry. Another tax change proposed by the American Health Care Act would allow more medical expenses to be deducted. Under Obamacare, households were allowed to deduct medical expenses over 10 percent of their income. The proposed changed would lower that threshold to 7.5 percent of income. The tax on high cost Cadillac plans would stay in place.

The American Health Care Act would eliminate taxes and give individuals a tax credit to purchase health insurance. A tax credit offsets tax liabilities at the end of the year. For example, if you owe $1,000 in taxes but you purchase a health insurance plan for $1,000 your tax liability drops to zero. The American Health Care Act also raises the limit for Health Savings Account contributions. Health Savings Account contributions are tax deductible.

A rollback in individual mandates and lower taxes will put more money in consumer wallets. Consumers will have more money to spend on other goods and services giving the economy a boost.

The Congressional Budget Office gave a mixed review to the American Health Care Act. On the positive side, lower government spending on health care will reduce the deficit and debt. On the downside, without an individual health care mandate many healthy consumers may choose not to buy health insurance. The drop in the number of healthy people in health insurance pools may push premiums offsetting some of the consumer savings from lower taxes. 

Theodore Cangero

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