The 2020 appropriations act, which was signed into law by the President on December 20, 2019, contains a mix of good and bad news for employer-sponsored health plans. On the good news side of the ledger, several taxes imposed by the Affordable Care Act have been repealed, as follows:
- To literally no one’s surprise, the so-called “Cadillac tax” on high-cost health plans has been repealed before it ever took effect. If this tax had taken effect, employers may have had to take steps to limit benefits provided under employer-sponsored health plans, including under account-based plans such as HRAs and health FSAs. Both employers and employees should regard this action as a “win.”
- The 2.3% medical device tax is repealed for sales made after December 31, 2019. The tax had been suspended since 2016, but was scheduled to go back into effect at the end of 2019. The repeal may help to lower the cost of affected medical equipment, assuming that the medical device manufacturers planned to pass the tax on to plans and consumers.
- The annual fee on health insurance providers is repealed for calendar years beginning after December 31, 2020. Although this tax was suspended for 2019, an IRS web page confirms that the fee applies for 2020 as the repeal is effective for years after 2020. See, https://www.irs.gov/businesses/corporations/affordable-care-act-provision-9010. To the extent that health insurers are passing the health insurance tax through to health plans, employers may experience a savings after 2020.
On the bad news front, the PCORI fee, which was scheduled to expire in 2019, was extended for an additional 10 years until 2029. The PCORI fee, which is assessed on both fully insured and self-insured health plans, is relatively modest, equal to $2.45 (for plan years ending before October 1, 2019), multiplied by the average number of covered persons and is paid annually on or before July 31.
About the Author:
Cynthia A. Moore is a Member in Dickinson Wright’s Troy office where she assists clients in all areas of employee benefits law. She can be reached at 248-433-7295 or firstname.lastname@example.org and you can visit her bio here.