Understanding Recent Affordable Care Act Headlines

If the 2010 version of me could see into the future, and see myself blogging in 2020 about court challenges and congressional action related to the Affordable Care Act (ACA), I wonder what he’d think. Sure, the ACA has been controversial since its inception… but we are nearing the 10 year anniversary of the landmark law, and so much still seems unsettled. If, in an egg nog-induced daze, you missed the headlines right before Christmas, there was both a major court decision related to the law, as well as new legislation passed that repeals a few of the ACA’s key provisions. Let's take a look at what you might have missed.

Fifth Circuit Court of Appeals Decision

Legal challenges to the ACA continue to chug their way through the court system, and like last year, a ruling dropped right before the holidays in the suit brought by several Republican-led states. Clicking the link in the previous sentence will take you to my post explaining this ongoing challenge. But in short, these states contend that with the Individual Mandate penalty (a fine for individuals who do not maintain Minimum Essential Coverage) currently set to $0, the entire ACA fails. The Fifth Circuit agreed with the lower court, ruling that the Individual Mandate is indeed unconstitutional. However, the court declined to rule on whether the ACA as a whole should be struck down.

At issue now is the concept of severability – can the Individual Mandate provisions be severed from the ACA? Or is the Individual Mandate so entwined with the rest of the law that the whole thing must be thrown out? The Fifth Circuit remanded the matter back to the district court to make that determination. Regardless, this matter will continue to churn its way through the courts for some time. It is expected that the matter will eventually make its way to the Supreme Court – the state of California has already indicated it is prepared to continue to defend the ACA all the way to the highest court.

So, for those that wish to see the ACA fail, December provided a minor victory, but the war will rage on.

ACA Tax Repeals

While the Fifth Circuit was ruling in New Orleans, Congress was also busy working on the ACA in Washington. Three key taxes levied by the ACA have now formally been repealed:

Cadillac Tax: this ACA provision, which would have imposed a 40% excise tax on high-cost employer-sponsored plans, was always a head-scratcher. While most of the ACA works to expand coverage availability and raise standards of coverage, the Cadillac Tax would have taxed very rich plans. Originally scheduled to take effect in 2018, the tax was delayed by Congress several times before being formally repealed in December.

Health Insurance Tax: a tax on all commercial health insurance, the Health Insurance Tax (HIT) has been enforced in fits and starts. The tax was spread across all commercial health insurers for the first few years of the ACA, then suspended for 2019. Congress did not take any action to continue the suspension for 2020, so the HIT is in effect this year. But December’s legislation ensures that 2020 will be the HIT’s swansong, as it will be repealed effective January 1, 2021.

Medical Device Tax: similar to the Cadillac Tax, the Medical Device Tax was scheduled to take effect several years ago (2013), but had been continually delayed by Congress. The tax would have imposed a 2.3% tax on manufacturers and importers of certain medical devices. With December’s legislation, it will never take effect.

The Impact on Employers

In the short run, I do not expect any significant impact on employers from these developments. The ACA is still the law of the land, and plan sponsors should continue to fulfill their obligations, such as reporting requirements. The repeal of the HIT will not impact all of the plans that just renewed on January 1, but it may have a moderating effect on renewal actions as we head toward 2021. In terms of the Cadillac Tax, I have not run across any plans that would have been in immediate danger of paying it... but I suppose the repeal may put at rest the minds of the sponsors of some very high-priced plans.

With a presidential election scheduled for this year, you can bet that there will be a lot of discussion of health care policy in the news. If you’re interested in personalized advice on how to stay current and compliant, give us a shout at bayoubenefits@gmail.com