President Trump has signed into law a spending package which includes the Further Consolidated Appropriations Act, (the “Act”), and contains a number of provisions related to employer-sponsored group health plans and the Affordable Care Act (“ACA”). Below is a summary of the key provisions found in the Act:
Repeal of ACA Taxes
- Repeal of Medical Excise Tax: The Act repeals the ACA’s medical device tax (a 2.3% excise tax on the value of medical devices sold domestically), effective for sales after December 31, 2019. This tax, which became effective in 2013, has been suspended by Congress twice and has not been in effect since January 1, 2016.
- Repeal of Annual Fee on Health Insurance Providers: The Act also repeals the ACA-imposed annual fee on health insurance providers. The fee, which applied to insurance policies in the individual and small group markets, Medicaid managed care, Medicare Part D, and Medicare Advantage plans, was effective beginning in 2015 but was suspended for 2017 and 2019.
- Repeal of Cadillac Tax Coverage: After several postponements, the Act finally repeals the highly unpopular excise tax on high-cost employer group health plans ( the “Cadillac” tax). The Cadillac tax would have imposed a non-deductible forty percent excise tax on the value of “applicable employer-sponsored coverage” in excess of statutory thresholds.
Other ACA Provisions
- 10-Year Extension of PCORI Fees: The Patient-Centered Outcomes Research Institute (“PCORI”) was established by the ACA to conduct research to evaluate the effectiveness of medical treatments, procedures and strategies that treat diagnose, manage or prevent illness or injury. The PCORI fee requires insurers and employers with self-funded group health plans to pay an annual fee to fund PCORI research. The Act extends the ACA’s PCORI fee for 10 years, meaning that insurers and employers will have to continue to pay this fee until 2029 or 2030, depending on their plan year. (NOTE: the annual PCORI will continue to be adjusted for inflation.)
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Reporting on Implementation and Enforcement Costs (In General): The Act contains provisions relating to ACA spending and reporting requirements, including:
- a prohibition on CMS from making risk corridor payments to insurers;
- a prohibition on CMS from making risk corridor payments to insurers;
- a requirement that HHS publicly disclose information about the costs associated with implementing, administering, enforcing, or otherwise carrying out the ACA; and
- a requirement that the fiscal year 2021 budget include detailed information from HHS regarding the amount of federal funds used for the ACA marketplace.
Extension of Certain Tax Provisions
- Reduction in Medical Expense Deduction Floor: The ACA changed the threshold amount for individual medical expense deductions from 7.5 percent to 10 percent. Subsequent legislation reimposed the 7.5 percent threshold for 2017 and 2018. The Act keeps the 7.5 percent threshold for 2019 and 2020.
- Employer Credit for Paid Family and Medical Leave: The 2017 Tax Cuts and Jobs Act established a business tax credit for certain employer-paid family and medical leave, which ranges from 12.5 percent to 25 percent of the wages paid to qualifying employees, where such wage payments are at least 50 percent of the wages normally paid to the employee. While this credit was originally made available to employers only for wages paid in 2018 and 2019, the Act extends the credit through 2020.
- Credit for Health Insurance Costs of Eligible Individuals: The Health Coverage Tax Credit (“HCTC”) is a refundable tax credit that pays most (i.e., 72.5 percent) of the cost of qualified health insurance for eligible taxpayers and their family members. The Act extends the HCTC credit for an additional year. (NOTE: Eligibility for the credit is limited to individuals who have experienced “qualifying” job losses and to individuals whose defined benefit pension plans have been taken over by the Pension Benefit Guaranty Corporation due to financial difficulties.)
The Act is available at: https://www.congress.gov/116/bills/hr1865/BILLS-116hr1865enr.pdf