New Federal Restrictions on Health Insurance From an Unexpected Source

This entry involves primarily the tax code.  Here is an interesting example of how the Internal Revenue Code gets made ever more complicated, including by legislators who say they do not want such complication.   My earlier blog post provides my suggestions on a simpler and better tax system.

One of the earliest pieces of legislation in the new congress is H.R,3, the No Taxpayer Funding for Abortion Act.  The stated purpose of this act is to make the Hyde/Weldon Amendment permanent.  For those unfamiliar with the Hyde amendment it prohibits federally funded programs, such as Medicaid, from paying for abortions except in cases of rape, incest, or if the mother’s life is endangered.  Since 2004 it has been extended with the Weldon Amendment, which prohibits discrimination against hospitals which do not provide abortion services.

The Hyde Amendment has been renewed like clockwork every year since 1976 regardless of which party has been in control of Congress, so making it permanent would seem like an innocuous proposition.  On the other hand, since continued annual renewals are a foregone conclusion there would be little point in making it a legislative priority unless something else was attached.  And there is.

The first is in the definition of the exception in section 309.  The key changes are in bold.

‘(1) if the pregnancy occurred because the pregnant female was the subject of an act of forcible rape or, if a minor, an act of incest;

There is no definition in the federal code of ‘forcible rape’ and one is not offered in the bill.  Neither is the specific term used in most state laws.  Thus, the inclusion of the new term might result in decreased applicability for a rape exception.  Even if that was an oversight to be remedied in amendments or the courts, why was the new word added?  I know that there are a lot of lobbyists in Washington, but is there really a Rohypnol lobby urging that the men adding their product in the drinks of their dates should not be included with violent criminals?  Is there a pedophile lobby arguing that their ‘not really rape’ shouldn’t be stigmatized? …  An inbreeding lobby saying incest isn’t bad if it is adults?  (Some off-color jokes about the behaviors of certain congressmen have been removed here.  You may mentally re-insert them if desired.)

The second major change in this bill from the Hyde Amendment occurs in Section 303, which is entirely new.


For taxable years beginning after the date of the enactment of this section.
‘(1) no credit shall be allowed under the internal revenue laws with respect to amounts paid or incurred for an abortion or with respect to amounts paid or incurred for a health benefits plan (including premium assistance) that includes coverage of abortion,

‘(2) for purposes of determining any deduction for expenses paid for medical care of the taxpayer or the taxpayer’s spouse or dependents, amounts paid or incurred for an abortion or for a health benefits plan that includes coverage of abortion shall not be taken into account, and

‘(3) in the case of any tax-preferred trust or account the purpose of which is to pay medical expenses of the account beneficiary, any amount paid or distributed from such an account for an abortion shall be included in the gross income of such beneficiary.

As a practical matter this will mean three things:

  1. People who self-fund an abortion for themselves or someone in their family will not be able to claim it as a medical expense if they take itemized deductions.
  2. Those who have any form of a Health Care Savings Account (HSA) will not have abortion to be considered a valid health care use of the funds.
  3. Insurance that includes abortion coverage will not be permitted as a tax deduction, either for individuals, self-employed persons, or businesses providing it as part of an employee benefits package.  The net effect of this is that abortion coverage is likely to disappear from health insurance plans.

As to the prohibition of deductions for any insurance with abortion coverage, Section 305 says the following:

Nothing in this chapter shall be construed as prohibiting any individual, entity, or State or locality from purchasing separate abortion coverage or health benefits coverage that includes abortion so long as such coverage is paid for entirely using only funds not authorized or appropriated by Federal law…

 However, it is unlikely that anybody in the individual market will offer such insurance. The reason is the upcoming law change that prohibits denial for pre-existing conditions. If you were an insurance company, would you offer abortion insurance that a woman could buy after she became pregnant? If so what would you charge for it? 

While the Hyde Amendment was a pretty straightforward matter of the government paying for abortions, HR-3 Section 303 attempts to use the tax code to more broadly change abortion policy.  However, the degree to which ‘taxpayer funding’ would actually be changed by section 303 is up for grabs, for the following reasons:

  1. Most women having abortions are not in income/deduction ranges to be itemizing.
  2. Most people manage the size of their HSA’s to cover their expected annual medical costs, not their unexpected ones like an abortion.
  3. Because abortion is cheaper than childbirth, including abortions in a health plan generally does not increase its cost, and thus there is no taxpayer cost for a higher deduction for the fact that a plan covers abortions. 

I understand the highly charged emotions regarding abortion in this country.  Nevertheless, the numerous sponsors of this bill should be a bit torn about this issue, because it conflicts with other issues that these same people usually support.  If supporters of these two changes are really as interested as they say in (i) making a tax code that is simpler, (ii) staying out of people’s personal lives, and (iii) not having the federal government micromanage the market for health care,  then they should be challenged by those convictions when it comes to their other social goals.  If they have the political will and votes to tackle abortion as an issue,  then they should do it directly, not by hanging another ineffective ornament on the tax code tree.

…and get rid of the date rape drug/pedophile/in-breeder exception to the exception.  That’s just plain embarrassing.


Politico is now reporting that a spokesman for the bill’s primary sponsor is saying that the revised wording of the rape exception will be replaced with the original Hyde Ammendment wording.  In doing so he re-iterated the bill’s goals of changing ‘taxpayer funding’ of abortions, not simply making the Hyde Ammendment permanent.

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