Sponsors of health plans have long known that the only constant in life is change. In 2020, that is surely to remain true.

Ding-Dong! The Cadillac Tax Is Dead!

On December 20, 2019, as part of the year-end appropriations bill, the Affordable Care Act’s (ACA) so-called 40% “Cadillac Tax” on high-cost health plans was finally, after much lobbying and other efforts by sponsors and health care payers, put to an end with a full repeal. The “Cadillac Tax” was currently scheduled to take effect in 2022 (after two delays), and would have taxed employer-sponsored plans worth more than $10,200 for “self-only” coverage and $27,500 for other coverage (in 2018 and would have been indexed for inflation in future years). The tax was initially intended to help reduce health care costs and pay for the ACA.

Compliance Note:  Plan sponsors should note, however, that the reporting of the value of employer-provided coverage on the Form W-2 in Box 12, using Code DD, did not change. As a result, employers should continue to report the value on Form W-2.

As part of the same bill, two other ACA taxes were also repealed: (i) the health insurance tax, and (ii) the 2.3% tax on medical devices. While the repeal of the medical device tax is effective beginning in 2020, the repeal of the health insurance tax is not effective until 2021, so sponsors of fully-insured health plans will need to wait another year for any premium savings passed on from insurers due to the repeal of the tax.

It’s Alive! The PCORI Fee Is Extended for 10 Years

The ACA imposes a fee on insurers of specified health insurance policies and plan sponsors of self-insured health plans to help fund the Patient-Centered Outcomes Research Institute (PCORI). 2019 was supposed to be the last year that most sponsors paid the PCORI fee. The fee has now been extended for 10 years, through plan and policy years ending before October 1, 2029.

The fee is required to be reported once a year on the second quarter IRS Form 720 (Quarterly Federal Excise Tax Return) and paid by its due date, July 31. The fee is based on the average number of lives covered under the policy or plan. For plan years ending from October 1, 2018 through September 30, 2019, the dollar amount was $2.45 per covered life.

Compliance Note:  Sponsors of self-insured health plans should continue to add payment of the PCORI fee to their compliance calendars, monitor applicate rates, and budget for the payments for the next 10 years. Insurers of fully-insured health plans are responsible for reporting and paying the PCORI fee.

Where We’re Going We Don’t Need Roads! Health Coverage Opportunities and Uncertainty

 2020 ushers in two new health reimbursement arrangements (HRAs). Proposed regulations were issued in 2018 as reported here and final regulations were issued in June 2019. The final rules allow HRAs and other account-based group health plans to be integrated with individual health insurance coverage or Medicare, if certain conditions are satisfied (an Individual Coverage HRA). The final rules also set forth conditions under which certain HRAs and other account-based group health plans will be recognized as limited excepted benefits (an Excepted Benefit HRA).

While 2020 brings these new health coverage options, it remains to be seen if there will be significant uptake from employers to disrupt the traditional group health plan coverage model. With the demise of the Cadillac Tax, plan sponsors are still likely to continue to grapple with the rising costs of health coverage and the ever-changing legal landscape. Questions remain:

  • Will the ACA survive? As reported previously, the decision in Texas v. U.S. declaring that the ACA is unconstitutional in its entirety because of the individual mandate continues to make its way through the courts to determine the issue of severability and will ultimately be decided by the U.S. Supreme Court
  • Will proposed legislative “fixes” and enhancements to expand access to Health Savings Accounts (HSAs) pass this year? Will HSAs dominate in a post-ACA world?
  • Will new Association Health Plan regulations be upheld, giving smaller companies more options to pool together to offer group health plan coverage?
  • How will the results of the Presidential election affect health coverage options in future years?

Answers to these and other questions could have a significant impact on plan sponsors (and their employees’) health care options and choices in the coming months and years. However, one answer remains clear: there will certainly be more change.

Back to Health Law Advisor Blog

Search This Blog

Blog Editors

Authors

Related Services

Topics

Archives

Jump to Page

Subscribe

Sign up to receive an email notification when new Health Law Advisor posts are published:

Privacy Preference Center

When you visit any website, it may store or retrieve information on your browser, mostly in the form of cookies. This information might be about you, your preferences or your device and is mostly used to make the site work as you expect it to. The information does not usually directly identify you, but it can give you a more personalized web experience. Because we respect your right to privacy, you can choose not to allow some types of cookies. Click on the different category headings to find out more and change our default settings. However, blocking some types of cookies may impact your experience of the site and the services we are able to offer.

Strictly Necessary Cookies

These cookies are necessary for the website to function and cannot be switched off in our systems. They are usually only set in response to actions made by you which amount to a request for services, such as setting your privacy preferences, logging in or filling in forms. You can set your browser to block or alert you about these cookies, but some parts of the site will not then work. These cookies do not store any personally identifiable information.

Performance Cookies

These cookies allow us to count visits and traffic sources so we can measure and improve the performance of our site. They help us to know which pages are the most and least popular and see how visitors move around the site. All information these cookies collect is aggregated and therefore anonymous. If you do not allow these cookies we will not know when you have visited our site, and will not be able to monitor its performance.