Yearend Spending Legislation has ACA Surprises

Yearend Spending Legislation has ACA Surprises

ACA tax 0

A couple of surprises were tucked inside the temporary funding bill that was passed by Congress at the end of 2019:

  • A long-anticipated repeal of the “Cadillac tax,” plus two other ACA-related taxes; and
  • A last-minute extension of the PCORI fees that had largely already expired.

Let’s take a quick look at the changes made to these taxes and how they may affect you.

Cadillac Tax. This tax was originally scheduled to apply to employer-sponsored health benefits starting in 2018 but had been pushed off to 2022. The legislation repeals it permanently. This is sure to be a relief for many employers who anticipated that they might eventually be forced to reduce their health benefits in order to avoid the tax.

Medical Device Tax. This tax, which was originally scheduled to apply starting in 2013, had also been delayed multiple times and was supposed to take effect on January 1, 2020. Like the Cadillac tax, it has also now been repealed without ever taking effect.

Health Insurance Providers Tax. This tax, which applies only to fully insured plans, has been in effect since 2013 but is being permanently repealed effective January 2021. The tax (sometimes referred to as the “excise tax”) has had a checkered history, having been assessed from 2013 through 2016 and in 2018, with temporary moratoriums in effect for 2017 and 2019. This has contributed to unpredictability in fully insured renewal rates over the past several years. It’s hoped that permanent repeal will help reduce volatility in such rates to some extent.

PCORI Fee. While most of our clients thought they were paying their last PCORI fees in July 2019, those with plan years that renewed between February 1, 2018 and October 1, 2018, were expecting to pay their final fees in 2020. The new legislation throws a wrench into that by making the PCORI fee applicable through 2029. (It will apply to plan years that start between October 1, 2018 and October 1, 2028). As always, carriers will pay this fee for fully insured plans (built into their rates) and self-insured employers will generally be required to calculate and pay the fee themselves. Both the dollar amount owed per covered life and the year the fee is owed will continue to vary depending on the first day of the plan year.

Bottom Line

While it’s unfortunate for employers that the PCORI fee is back from the dead, overall the legislation brings more good news than bad for employers. Contact me or a member of your account team if you have any questions!


By Julie Athey, Director of Compliance, The Miller Group




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