Two spending bills aimed at avoiding a government shutdown were recently passed by Congress and signed into law by President Trump. Of those related to employee benefits, the legislation includes a full repeal three of the ACA’s most substantial (and unpopular) taxes:
First, it removes the Medical Device Tax effective January 1st, 2020. This particular tax is a 2.3% excise tax on items such as artificial joints, tongue depressors and pacemakers. It originally went into effect back in 2013, but was postponed by Congress from 2016 to 2020.
Second, it repeals the Health Insurance Tax (HIT) as of January 1st, 2021. The HIT applies to all insurance carriers that sell fully-insured health plans in the group marketplace, or in public programs like Medicare. This tax was effective in 2014 through 2016, was suspended during 2017, and went back into effect for 2018 before being suspended again for 2019. It will remain in effect through 2020 and end for good in 2021.
Third, this law fully repeals the unpopular “Cadillac Tax” as of January 1st, 2020. This tax was designed to discourage high-cost employer-sponsored coverage, which was a 40% excise tax on employer plans that exceeded a certain premium amount. It was originally scheduled to take effect in 2018, but was delayed to 2020 and, and then again to 2022.
Despite the repealed taxes, however, a 10-year extension of the PCOR fee was also imposed. The PCOR fee, which applies to self-insured plans, was initially scheduled to end in 2019, with last payment due July 31, 2020. The extension applies through plan years ending on or before September 30, 2029 with last payment due by July 31, 2030. For more information on PCOR fees, see my previous blog here.
On a related note, a federal court of appeals recently ruled that the ACA’s individual mandate is unconstitutional and requested that a lower court decide whether other ACA provisions can remain since the individual mandate is now $0. It's very important to note that several key provisions for employers still apply. This includes the employer mandate and ACA reporting requirements (filing Forms 1095 and 1094). Please don't confuse this December legislation as a complete repeal of the ACA.