The Alan Katz Health Care Reform Blog

Health Care Reform From One Person's Perspective

Repealing PPACA’s 1099 Provisions Could Happen Soon — Maybe

Posted by Alan on April 1, 2011


Getting anything done in today’s Washington is never easy. Even when there’s widespread agreement. .

Congress has been trying to eliminate the 1099 requirements since last year. Everyone agrees that the provision is an unaffordable burden on American business. President Barack Obama supports removing it from the health care reform law. So do a majority of Democrats and Republicans in Congress. It’s not hard to see why. Today businesses file a 1099 with the Internal Revenue Service only when they pay contract workers $600 or more. The Patient Protection and Affordable Care Act expands this to all vendors and contractors providing $600 or more in goods or services. Meaning a business (non-profit or government agency) buying $600 in paper and staples per year from, say Staples, would be required to file a 1099 form. Same with paying the guy who waters the plants. Or UPS for delivering products. Or the printer, the security service, the landlord, the … well, you get the idea.

Even with what passes in the Capitol these days for near universal support, Congress has tried and failed to repeal the provision. The problem is that more thorough reporting of payments for goods and services is expected to bring roughly $20 billion into federal coffers over the next 10 years. Repeal the enhanced reporting and the money goes away.

Democrats and Republicans have differed on how to make up for these lost funds. The House approach is to increase the amount consumers will need to repay if they receive premium subsidy overpayments. (The PPACA will assist consumers purchasing coverage through exchanges set up by the health care reform law. The premium subsidies vary based on consumers’ income as reported in previous years. If their income turns out to be higher than anticipated consumers will need to repay a portion of the subsidy).

Here’s an example used by Representative Joseph Crowley as reported in the New York Times: “A family of four with an annual income of $88,000 buys a typical family insurance policy costing $13,000. The family would have to pay $8,360 in premiums and could qualify for a federal tax credit of $4,640, which the Treasury would pay directly to the insurance company. If the breadwinner receives a $250 bonus at work, the family would become ineligible for the tax credit and would have to repay the full amount, $4,640, with its income taxes.”

Democrats oppose this outcome because the overpayment of the subsidy was no fault of the consumer. As reported in the The New York Times article, they see this as a “tax increase on the middle class” claiming “honest taxpayers might find themselves owing large sums to the I.R.S.” This they consider a tax trap. Republicans in the House deny repaying money to which one is not entitled can be described as a tax increase. They also claim it’s the same offset Democrats proposed to pay for adjusting Medicare payments to doctors, according to The Hill’s On the Money blog.

The Senate has taken a different approach to paying for repeal of the 1099 provision. They want the Office of Management and Budget to recapture unused federal dollars from various governmental agencies. But it appears there may now be sufficient votes in the Senate to go along with the GOP approach. So things will happen quickly now, right? Perhaps, but maybe not.

Senator Robert Menendez wants the Senate to consider an amendment requiring Health and Human Services to determine the impact the subsidy claw-back provision in the House bill will have on the overall cost of coverage purchased in the exchange. If this amendment were to pass, the Senate version of the legislation would differ from that passed by the House. This, in turn, would require the bill to go back to the lower House delaying passage of the repeal.

Republicans, however, are expected to stand united in opposition to this amendment, effectively blocking its passage. Assuming this is the way things play out next Tuesday, the bill could wind up on President Obama’s desk sooner rather than later. The Administration, in the past, has expressed “serious concerns” about the way the House bill retrieves subsidy overpayments. A statement from the Office of Management and Budget notes “H.R. 4 could result in tax increases on certain middle-class families that incur unexpected tax liabilities, in many cases totaling thousands of dollars, notwithstanding that they followed the rules.” The statement goes on to support the Senate approach to paying for repeal of the 1099 reporting provisions in the health care reform law.

Whether President Obama signs the legislation in an act of bi-partisan compromise or vetoes it in the cause of avoiding a middle class tax cut won’t be known for sure until the bill is before him. It remains highly likely the tax reporting element of the PPACA will eventually be repealed. Whether this will happen soon remains an open question.

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11 Responses to “Repealing PPACA’s 1099 Provisions Could Happen Soon — Maybe”

  1. Bob Hertz said

    It seems grotesque that Congress will harm thousands and thousands of businesses, just to preserve $20 billion over 10 years.

    $20 billion in 10 years averages out to $2 billion a year.

    It is incredibly easy for the US government to raise $2 billion a year.

    We could increase the Medicare payroll tax for 2.9 percent to 2.9033 per cent and accomplish the same thing.

    At 2.9033 per cent, on a person making $50,000 a year, the employer and the employee would each see their tax go up by $83.50 a year.

    Assuming 24 pay periods, we are looking at $3.47 per pay period.

    Actually the entire health care bill has contortions like this because of the perceived inability to openly raise taxes. A simple broad-based increase in income or payroll taxes is so much easier to explain, and so much less a burden, than Obamacare’s mandates or the many other nuisance fees.

    If we cannot raise taxes by $3.47 per pay period to help the uninsured, then our social greed is indeed despicable.

    Bob Hertz
    The Health Care Crusade

  2. Even with what passes in the Capitol these days for near universal support, Congress has tried and failed to repeal the provision. The problem is that more thorough reporting of payments for goods and services is expected to bring roughly $20 billion into federal coffers over the next 10 years. Repeal the enhanced reporting and the money goes away.

  3. Barry said

    if Congress can’t pass this, what CAN they pass?

  4. Stevie Lee said

    If they can’t get the darn thing passed, what about a simple “waiver” delaying its implementation. They seem to be pretty generous with those.

  5. Love the response Spencer. Looks like a political hot potato. Time for term limits for these clowns.

    • Thank you for the comments, Harald.

      As for it being time for term limits: I think that we are way overdue for both Political and Legal Reform. Those who have used and abused our legal system to exclusion of the best interests of their clients in their greedy quest to make ever greater sums of money, as with those career politicians who have done the same, and ignored the best interests and wishes of their constituents, need to be told, in policy and in word, “Your self aggrandizing ride is over!”

      Let those in the House have three, four year terms only (two years is ludicrous…they work one, and campaign one). The Senate should be kept to two six year terms only. That’s 12 years total, each. Keep the President at four years, two terms only. Good grief, Obama is already planning to start his campaign for 2012 and we haven’t even hit the midway point in 2011.

      UNDER NO CIRCUMSTANCES should any member of Congress or the Administration be allowed to live in a parallel dimension. They must always, without exception, live under the law they make that they insist the rest of us must follow. Federal Employees, as with State Employees, deserve no better a system than do all of the rest of this country who live and work and produce in the private sector, and that includes Teachers, Civil Service Employees, and everyone else. If they can’t produce an acceptable product, they can hit the streets and start looking for a job. No “Free Rides” for anyone.

      Nothing in the preceding is aimed at taking away anything from any group. It is, instead, aimed at creating “Equality” for all. It is time that we begin implementing the requirement that all Federal, State, Legal Profession, Political, and all other Employees start experiencing the Equality that the rest of our society experiences, without exception.

  6. “Even with what passes in the Capitol these days for near universal support, Congress has tried and failed to repeal the provision. The problem is that more thorough reporting of payments for goods and services is expected to bring roughly $20 billion into federal coffers over the next 10 years. Repeal the enhanced reporting and the money goes away.”

    Alan, as you know well, and I know well, once law is made it is very difficult to amend that law. We have both spent a large part of our careers working in the political sector trying to “make a difference”. I have no doubt that you, and certainly I, have learned that the above truism didn’t become a “truism” until years of experiencing attempting to amend bad legislation is very difficult.

    The PPACA has a number of serious flaws: Over 1,000 Waivers have been granted by HHS to Unions, States, Big Corporations, and others seeking relief from the onerous provisions of ObamaCare. Agents by the thousands are being put out of business, or are expected to work for free. The Exchanges vary a good deal from state to state, some states allow agents to participate in the committees established to set up a state’s Exchange, and several have legislation pending to deny, prevent, any agent from serving in an advisory position. $500Billion has been determined to be the amount to be “stolen” from Medicare in order to transfer those funds to the PPACA in order to help pay for it. The 90 Day Open enrollment period has been repealed by ObamaCare and has been replaced by a 45 Day DISenrollment period annually in ObamaCare’s attempt to rid the country of Medicare Advantage Plans. This list continues into naseum, ad vomitous.

    It has been agreed by both sides of the aisle that the 1099 provision is very discriminatory to small business, was one of Obama’s “We made some mistakes in our rush to get something done” (Duh!), and that amending it, repealing that provision, has become another political football being tossed around while agents and other small business continue to be made to suffer.

    It is very likely that the Exchanges will implode, other features of the PPACA will implode (over 1,000 waivers in the first actual year of implementation, a year only partly over???), and that when all is said and done, the PPACA will implode, going down in history as a massive, major mistake that will mark the Obama Presidency as one of the biggest mistakes to happen to America in its history; and Who will than make this country whole again? Or is the best we can expect, after all of the tears, all of the pain, all of the ruined lives, is to hear from those Congressional Democrats and President Obama the word, “OOPS.”

    • Stevie Lee said

      I don’t know if I’m getting paranoid or what. From where I sit, PPACA was meant to fail, but not in the way you envision. When the day of reckoning arrives, its ultimatre failure will be blamed on the insurance carriers and those supporting this wretched bill will claim they need to further rescue us by now having the government institute the public option. But it will not be an option among others; it will be the only option. Something akin to Medicare for all. But clearly not as good as Medicare because who could possibly foot the bill for insuring the entire country? On the other hand, what’s another trillion or two added to the annual deficits?

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