The Health Care Fairness for All Act restructures federal health-financing around a new individual tax credit (new section 36C of the Internal Revenue Code), a transition of Health Savings Accounts into non-deductible ‘Roth HSAs,’ and repeal of the ACA’s individual and employer mandates. The bill also narrows which ACA-era insurance rules remain federal floor protections, gives states sweeping authority to design markets and default-enrollment options, and creates a comprehensive Medicaid payment reform tied to standardized per-beneficiary rates.
This is a structural redesign: the bill replaces mandate-based coverage incentives with an upfront, monthly credit tied to premium payments and HSA contributions; moves tax-preference away from deductible HSAs to Roth-style accounts; and shifts many market-shaping decisions to states while establishing federal backstops (risk adjustment, minimum consumer protections, guidance). For payers, states, and providers the changes would remake pricing, eligibility rules, reporting, and federal–state payment relationships — with material fiscal and operational implications for Medicare, Medicaid, employers, insurers, and consumers.
At a Glance
What It Does
Creates a refundable, monthly health insurance tax credit (section 36C) that can be paid as an advance to insurers or deposited to HSAs; repeals the individual penalty (IRC 5000A termination) and the employer mandate (strikes IRC 4980H and reporting under section 6056); converts HSAs into Roth-style non-deductible accounts and stops new deductible-HSA contributions after 2025.
Who It Affects
Individuals who buy individual-market coverage or use HSAs; employers (loss of mandate and new reporting adjustments); insurers and Exchanges (new subsidy rules, state market designs, required participation in a national risk-adjustment mechanism); states (new market control and a new option to receive a share of unused credits to fund indigent care); Medicare and Medicaid programs (site-neutral payment rules and a new per-beneficiary Medicaid payment model).
Why It Matters
The bill replaces mandate-based incentives with direct tax subsidies and account-based funding, substantially shifting where and how coverage is bought and paid for. That change will affect premium pricing, risk pools, federal fiscal exposure, and state budget responsibilities — and it creates implementation tasks (new advance-pay programs, HSA redesign, risk-adjustment infrastructure) that regulators and payers must solve.
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What This Bill Actually Does
At the center of the bill is a new, refundable health insurance tax credit (codified as section 36C). The credit is computed monthly: a baseline per-person annual amount (expressed as $4,000 in the bill) and an additional per-child component (expressed as $2,000) are allocated monthly, but the credit available in any month cannot exceed the sum of HSA contributions plus premiums paid that month.
The Treasury will operate an advance-payment system that can send credit money directly to a taxpayer’s Roth HSA or to the insurer as a premium subsidy; reconciliations and limits mirror ACA-style advance-payment rules but include a mechanism that reduces the credit where an employer-provided tax subsidy already subsidizes coverage.
The bill dismantles major ACA coverage mandates: it terminates the individual mandate effective for months after December 31, 2024, and repeals the employer “pay-or-play” penalty and associated employer reporting (striking IRC 4980H and section 6056). At the same time it preserves selected consumer protections (no lifetime/annual limits, dependent coverage to age 26, guaranteed availability/renewability, prohibitions on preexisting condition exclusions and health-status underwriting for most plans) while allowing states to opt to relax or modify other ACA requirements.
States may also create a ‘default health insurance’ enrollment option for uninsured residents (a limited high-deductible plan designed to pair with HSAs), provided residents can easily opt out.Title II reorganizes tax-favored accounts: the bill creates Roth HSAs (non-deductible contributions, tax-free distributions for qualified medical expense uses) with explicit contribution limits and phases out new contributions to traditional, deductible HSAs after December 31, 2025 (with narrow rollovers permitted). It also ends the itemized medical expense deduction (except for long-term care premiums) for taxable years after 2025.Medicare and Medicaid receive parallel reforms.
Medicare provisions promote site-neutral payments and require separate identifiers for off-campus hospital departments; Medicare Advantage is permitted to deposit supplemental payments into chronically ill enrollees’ Roth HSAs. The bill replaces large parts of traditional Medicaid financing with a standardized, beneficiary-based federal payment model: the Secretary will compute national, risk- and geography-standardized per-beneficiary amounts by beneficiary category and phase states into corridors around the national average, with state shares, risk adjustment, chronic-care performance bonuses, and an option for states to consolidate Medicare payments for full-benefit dual-eligibles into state-administered payments.Implementation-heavy provisions include a mandatory nationwide risk-adjustment mechanism for the individual market, reporting requirements for insurers and HSA trustees to support reconciliation, a transfer rule to forward prior plan records to new issuers, permanent telehealth flexibilities, protection rules when limited-benefit plans reach annual caps, and an appropriation mechanism allowing part of unused credits to be made available to states for indigent care.
The Five Things You Need to Know
The bill creates section 36C, a monthly, refundable health insurance tax credit that begins for taxable years after Dec. 31, 2025 and is capped in any month by the sum of (a) that month’s HSA contributions and (b) the premiums paid for creditable coverage.
It terminates the federal individual mandate provision (IRC §5000A) for months beginning after Dec. 31, 2024 and repeals the employer mandate by striking IRC §4980H and related employer reporting (section 6056).
The bill converts HSAs into Roth-style, non-deductible Roth HSAs (new Code §530A), sets the base annual Roth HSA limit at $5,000 (indexed later), and prohibits new contributions to deductible HSAs after Dec. 31, 2025 (except limited rollovers).
Title IV replaces most current Medicaid financing with a standardized, per-beneficiary federal payment model (section 1903A) that (a) computes base per-beneficiary amounts by beneficiary category, (b) applies national standardization and a 90–110% corridor transition for states, and (c) conditions federal payments on a required state share and data reporting.
Section 122 preserves several ACA consumer protections but explicitly allows states to (a) limit open enrollment, (b) impose premium differentials by age up to 5:1, (c) authorize default enrollment into a defined high-deductible ‘default’ plan paired with a Roth HSA, and (d) waive essential health benefit requirements federally.
Section-by-Section Breakdown
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Repeal of individual and employer mandates; employer reimbursements treated as non‑group plans
Section 101 terminates the IRC §5000A individual mandate effective for months after December 31, 2024. Section 102 deletes IRC §4980H and the employer-reporting section 6056, eliminating the federal employer pay-or-play penalty and related reporting. Section 103 explicitly says employer health reimbursement arrangements that reimburse individual premiums are not group health plans for a broad swath of federal statutes (PHSA, ERISA, HIPAA privacy rules), except for section 36B coordination — effectively green-lighting employer premium reimbursement as a method to steer employees to individual-market coverage. Practically, employers will no longer face penalty risk but must account for new payroll/income tax interactions under the 36C regime.
Narrowing ACA requirements while preserving core consumer protections and granting state market tools
This subtitle reverts many PHSA title XXVII provisions to their pre-ACA text except for a carved list of consumer protections (e.g., no lifetime/annual limits, dependent coverage to age 26, guaranteed availability/renewability, preexisting-condition and health-status protections in most cases). It authorizes a late-enrollment premium penalty (20% premium increase per 12-month gap, capped to a period set by regulation) unless a state obtains a waiver with an alternate incentive structure. The Secretary must coordinate application of these retained protections across PHSA, ERISA, and the IRC. States are given express authority to limit open enrollment, vary adult age-rating up to 5:1, create initial enrollment windows, and establish default enrollment into a specified high-deductible plan paired with a Roth HSA.
Health insurance tax credit (new IRC §36C): structure, reconciliation, and limitations
Section 131 inserts new IRC §36C. The credit is monthly, computed from statutory per-person and per-child dollar amounts (the draft uses $4,000 per adult and $2,000 per qualifying child, allocated monthly), but the allowable credit each month cannot exceed the sum of HSA contributions plus the premiums paid. Employers’ existing tax subsidies are netted out: the 36C credit is reduced by the taxpayer’s employer-provided health insurance tax subsidy (a combined federal income and payroll tax measure). Treasury will run an advance-payment program (advance-to-insurer or advance-to-HSA), require insurer and trustee reporting to support reconciliation, and impose reconciliation rules that can require taxpayers to repay excess advance payments subject to income-based caps.
HSA redesign: Roth HSAs and elimination of the itemized medical deduction
Title II creates Roth HSAs (new Code §530A): non-deductible contributions, tax-free distributions for qualified medical expenses, defined contribution limits (base shown as $5,000 annually, indexed using a medical CPI component), and rollover rules. It phases out new contributions to deductible HSAs after 2025 while permitting rollovers and certain employer-transition exceptions. Section 202 terminates the medical expense itemized deduction for taxable years after 2025 (except long-term care premiums). The net effect is to move tax preference from ex ante deductible contributions to ex post tax-free distributions via Roth-style HSAs and to simplify (and limit) the universe of tax-favored medical deductions.
Medicaid payment reform: standardized, beneficiary‑based federal payments and performance incentives
Section 401 inserts a new section 1903A into the Social Security Act establishing a reformed federal payment methodology. The Secretary will compute base per-beneficiary amounts by four beneficiary categories (elderly, blind/disabled, children, other adults) using a base fiscal year and apply national standardization to remove geography and risk-driven variation. States will be transitioned into a 90–110% corridor around the national average with a phased adjustment factor; risk adjustment and county-level geographic adjustments will apply; states must provide a specified non‑Federal state share and submit standardized reporting (including Medicaid MLR data for managed-care plans). The statute also creates chronic-care bonus payments tied to performance targets and offers a state option to receive payments in lieu of Medicare for full-benefit dual eligibles (provided state payments meet or exceed Medicare rates).
Medicare and market operations: site-neutrality, telehealth, and price transparency
The bill strengthens site-neutral payment policy (limits exceptions for off‑campus outpatient departments, requires separate NPIs for off-campus departments by 2026) and permanently extends certain telehealth flexibilities for Medicare. It restores pre-ACA prohibitions on physician-owned hospital restrictions and forbids reliance on an inpatient‑only list in Medicare outpatient designations. Finally, the 2019 hospital price‑transparency rule is given statutory force, requiring hospitals to publish standard charges.
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Explore Healthcare in Codify Search →Who Benefits and Who Bears the Cost
Every bill creates winners and losers. Here's who stands to gain and who bears the cost.
Who Benefits
- Uninsured and low‑income individuals choosing individual coverage — they gain a universal, refundable monthly tax credit (advanceable) that can be used as a premium subsidy or placed into a Roth HSA to defray costs.
- States — receive broad regulatory control to design markets (open enrollment windows, age rating, default enrollment) and access to a portion of estimated unused federal credits to fund indigent care under a grant formula.
- Consumers using HSAs and direct primary care — Roth HSAs expand tax‑free withdrawal flexibility and the bill explicitly treats direct patient care (prepaid physician arrangements) as eligible medical spending for account use.
- Medicare Advantage chronically ill enrollees — MA plans may deposit supplemental payments into beneficiaries’ Roth HSAs, increasing care-financing options for high-need patients.
- Employers seeking flexibility — repeal of the employer mandate and an explicit rule that certain employer premium reimbursements are not group health plans removes prior legal exposure and enables new employer payment models.
Who Bears the Cost
- Federal budget (Treasury) — the refundable, advanceable tax credit and Medicaid payment model increase near‑term federal fiscal exposure and require new administrative outlays (advance-payment system, reconciliation costs, risk-adjustment infrastructure).
- Insurers and Exchanges — must implement new advance-payment reconciliation, report to Treasury and HHS, participate in a nationwide individual‑market risk‑adjustment mechanism, and compete in markets that states may redesign (including higher age-rating differentials and default plan options).
- States — required to shoulder explicit state-share obligations under the reformed Medicaid payments, run new market-management functions, and potentially cover added costs if grant reconciliation shifts funds; they also face operational costs to implement default enrollment and HSA linkage.
- Hospitals and providers — face site‑neutral payment changes and potential revenue reductions from off‑campus department payment reforms, plus new constraints when limited‑benefit plans cap annual benefits and asset-protection rules limit collections.
- Low‑income patients in limited‑benefit plans — could see reduced actuarial protection (plans that cap annual benefits), shifting more uncompensated care risk to safety-net providers and states despite the bill’s indigent‑care grant mechanism.
Key Issues
The Core Tension
The central dilemma is choice and affordability via individualized subsidies and account-based financing versus collective financial protection and universality: the bill increases consumer control and state flexibility but does so by eroding federal benefit guarantees and relying on market mechanisms (credits + HSAs) that can fragment risk pools and shift unpaid cost burdens to states, safety-net providers, and beyond — a trade-off with no administratively neat resolution.
The bill trades a mandate-and-regulation approach for a market‑and-account approach: policy levers shift from penalties and federally mandated benefit standards to a monthly advanceable subsidy and state-level market architecture. That move creates three core implementation puzzles.
First, coordinating the new section 36C advance-payment and reconciliation system with existing employer tax treatment and payroll reporting is complex: the bill nets out an employer-provided tax subsidy and treats excess employer subsidization as additional taxable income, requiring new employer reporting and withholding guidance. Second, preserving selected ACA consumer protections while allowing states to opt out of others invites adverse selection and premium divergence; the bill attempts to blunt that with a national risk-adjustment mechanism and a late‑enrollment penalty, but risk-adjustment across a more heterogeneous state‑driven patchwork is technically challenging and data-dependent.
Third, the Medicaid payment redesign replaces open‑ended matching with standardized per‑beneficiary payments; implementation requires robust risk‑adjustment, county‑level geographic normalization, and precise baseline calculations — all of which create opportunities for disputes, appeals, and gaming unless the Secretary and states rapidly align data standards and audit regimes.
There are also distributional and legal questions the text leaves unresolved. The Roth HSA design, the end of the medical-expense deduction, and the ban on new deductible-HSA contributions alter incentives for plan design and consumer behavior but may disadvantage low‑income people with high short‑term costs (who historically relied on employer-sponsored comprehensive plans or Medicaid).
The bill’s protections when limited-benefit plans hit annual caps shelter some assets from collection, but they also allow insurers to sell narrowly capped products paired with HSAs — increasing the likelihood of uncovered catastrophic costs. Finally, the sweeping state flexibilities and transfers of authorities raise potential ERISA, HIPAA, and state‑federal preemption questions that will demand regulatory and judicial clarification.
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