The Affordable Care Act (ACA) is likely here to stay.
However, in late December 2019, there were a series of ACA updates that all employers should be aware of and review. Below is a summary of these recent ACA developments that might affect you and your business.
1. ACA Individual Mandate is Unconstitutional by the Fifth Circuit Court of Appeals
On December 18, 2019, the Fifth Circuit Court of Appeals issued its decision in the Texas v. U.S. Case. The Fifth Circuit held that the ACA individual mandate was unconstitutional. The Court, however, did not conclude whether the entire ACA was invalid – rather, they remanded the case back to the District Court for a more careful analysis of which provisions (if any) of the ACA could survive without the individual mandate provision.
The court found that Congress lacked authority to impose the ACA individual mandate but used its constitutional authority to impose it as a tax.
Once the 2017 Tax Cut and Jobs Act reduced this tax to zero, the provision was no longer constitutional according to the court. The court further concluded that without the individual mandate, the rest of the ACA was invalid, as the individual mandate was essential to creating effective health insurance markets. This decision drew much attention and was eventually appealed to the Fifth Circuit.
While this decision is one step closer to overturning the ACA, the law remains for the time being with no changes in employer obligations. The Federal District Court is now required to conduct a more in-depth analysis of the overall impact of the individual mandate being held unconstitutional as part of the ACA. Until a final decision is issued, employers must continue to meet their ACA compliance requirements. The case was appealed to the U.S. Supreme Court on January 3, 2020 and the fate of ACA could once again be ruled on by the high court. We will keep you posted on this ACA development.
2. State Reporting Requirements
In response to the repeal of the individual mandate, several states have begun to impose their own state mandate in order to stabilize their state health insurance exchanges. Employers should, as a result, continue to monitor state filing requirements for any state in which their employees pay taxes. Several states have also enacted legislation effective for 2019 reporting, which requires separate filings with the state. At this point, each state is adopting their own regulations and process for complying.
3. Extension of ACA Filing Deadline
The ACA reporting deadline for providing forms to employees was extended from January 31, 2020 to March 2, 2020 in IRS Notice 2019-63. The IRS filing deadline remains unchanged with electronic submissions due March 31, 2020 and those filed via paper on March 2, 2020.
4. Recent ACA Development in the Further Consolidated Appropriations Act, 2020
On December 20, 2019, the President signed into law this large spending bill. Included within the bill were the following ACA items that were repealed or modified by this legislation:
- The so-called “Cadillac Tax” in the ACA applied to high-cost health plans and had long been a concern of employers since it taxed employers with higher claims, regardless of whether the plan benefits were particularly rich. Congress had postponed the effective date of the Cadillac Tax several times, and now it has been permanently repealed by Congress.
- The ACA’s Health Insurance Tax (or Fee) that applied to insurance carriers for years and was passed along to fully insured plans will apply for one more year in 2020, but then will be eliminated and fully repealed. This is intended to help reduce the cost of health insurance.
- Next, the Medical Device Excise Tax was also a controversial ACA provision since its inception. It too will be repealed. The elimination of this excise tax may have an indirect impact on the cost of care by reducing the cost of medical devices.
- Finally, the Patient Centered Outcomes Research Institute (PCORI) fee was extended for another 10 years. Before this legislation, the PCORI payment in 2019 was anticipated to be the final year of this fee.
We will continue to monitor ACA requirements and developments, and then provide updates as soon as they are available. If you have any questions, please consult your Sikich tax advisor.