The Senate passed H.R. 4 today to remove the Affordable Care Act’s enhanced 1099 reporting requirements.  President Obama has not yet indicated whether or not he will sign the bill into law. The White House supports the bill’s goal of eliminating the enhanced reporting requirements for businesses but has expressed concerns about the offset that was included to pay for the lost revenue as it would weaken the affordability protections of the ACA. 

The Senate rejected an amendment offered by Senator Robert Menendez (D-N.J.) that would disallow the offset if HHS determined that it would reduce the number of insured individuals or raise insurance premiums. The amendment failed on a close vote.

To explain how the offset used in this bill will weaken the affordability protections of the Affordable Care Act, we turn to the excellent explanation provided by Katherine Howitt on Community Catalyst’s Health Policy Hub:

“Starting in 2014, the Affordable Care Act provides sliding-scale tax credits to help lower the costs of premiums for people earning up to 400 percent of the Federal Poverty Level (around $73,000 for a family of three.) The law allows the federal government to pay these tax credits directly to the insurer each month, so beneficiaries will only be billed for the amount of the premium they owe in excess of their tax credit. But if a person’s income changes during the year, they could potentially be eligible for an additional credit or owe an additional amount when they file their taxes. To strike a balance between recapturing subsidies and not hitting working families too hard, Congress placed caps in the ACA on how much low- and moderate-income families could be required to repay.

Earlier today, that balance was tipped against working families. Congress paid for the 1099 repeal by increasing the amount by $500, and sometimes more, that some low- and moderate-income families could have to repay at the end of the year if their annual income was higher than expected.

For example, a family may start the year off with a very low income and qualify for substantial premium tax credits each month. Midway through the year, one family member then gets a new job that raises the family’s income and offers health insurance, and they stop receiving monthly premium tax credits. However, at the end of the year that family will have to repay some of the tax credits they received when their income was lower, since their annual income turned out to be higher than their expected annual income when they qualified for the credits. The 1099 repeal bill passed by the Senate today increases the amount that many families in this situation will have to repay.

This provision is harmful to families and is politically dangerous because it:

• Increases financial penalties on low- and moderate-income families for having found a better job or gotten a raise. These new costs will impose financial hardship on already-struggling families.
• Reduces the number of people who will enroll in the advanced tax credits, since they will fear this type of unexpected cost. This means fewer people will get the coverage they need.
• Jeopardizes public support for the ACA. Stories of families owing substantial unexpected costs could lead to further decline in public support for the law.“