While Washington was noisy with impeachment drama last week, four important provisions of the Affordable Care Act (ACA) were quietly amended as part of the two government funding bills that were signed by President Trump on Friday, December 20. These changes are impactful to employers, and largely positive.
Congress has been kicking the can that was the unpopular Cadillac Tax down the road for a decade. Currently this 40% excise tax on employers with so-called “high cost” coverage was set to go into effect in 2022. However, bipartisan support for its repeal finally found legs in this legislative session, and it is officially repealed.
Health Insurance Tax
This tax on health insurers (passed through to employers through premium increases) has come in and out of play for the past several years. Most recently, it was suspended in 2019 and reinstated for 2020. It will be repealed for good effective January 1, 2021.
Medical Device Tax
This is another ACA tax that has come in and out of play. It was in place for 2013-2015, and the suspended from 2016-2019. With this amendment to the ACA, this tax is fully repealed effective at the end of 2019. While this doesn’t directly impact employers, it indirectly impacts the cost of covered medical devices and thus is a welcome change.
Employers will remember this fee for funding the Patient Centered Outcomes Research Institute (PCORI), for which the final payment was made for most employers and insurers in 2019. It has been reinstated in the spending bill and will continue now for another ten years. The PCORI fee isn’t a significant cost driver – in its last year the amount of tax was $2.45 per covered life – but it is a compliance step that employers will need to continue to take moving forward. And if the work done through the Institute’s research leads to better outcomes, it could ultimately lead to cost savings.
A final development on the ACA front came out of the Fifth Circuit federal appeals court. The Court affirmed the district court decision in Texas v. United States, finding that the ACA’s individual mandate is unconstitutional. This is far from the last word on this litigation – the case was remanded for further analysis of whether other provisions of the ACA should be allowed to stand. And attorneys for the federal government intend to appeal to the Supreme Court.
Just as with the court initial decision, there is no immediate effect for employers. The ACA will remain the law of the land until an ultimate resolution is reached. Our advisory and compliance teams will continue to monitor and advise of new developments when they occur.