Further Consolidated Appropriations Act of 2020 and ACA Taxes

On Friday night, December 20, President Trump signed two spending bills that keep the federal government funded until September 20, 2020. 

One of the bills was called the Further Consolidated Appropriations Act of 2020. This omnibus bill includes many provisions beyond keeping the federal government running.  For example, it extends the Work Opportunity Tax Credit (WOTC); the federal tax credit for employers that provide paid family and medical leave; and several immigration-related programs, including E-Verify.  The bill also provides several improvements in 401(k) rules.

However, this bill also addresses the Affordable Care Act in these important ways:

  1. The Cadillac tax is fully repealed and not kicked down the road beyond January 2022.
  2. The excise tax on medical devices is repealed effective December 31, 2019.
  3. The excise task in health insurers (some call this the ACA Market Share Fee or the Health Insurer Fee) is repealed effective January 1, 2021. 
  4. The PCORI fee, which was supposed to expire for plan years ending after September 30, 2019, has been extended for another 10 years.  It will continue to have an inflation-adjusted mechanism.

Since the PCORI fee has not been a “big ticket” item, its continuance will likely not require self-funded employers to revise their 2020 health budgets or rates.

We will continue to keep you advised as we learn more about the impact of these spending measures.

Questions? Please contact the Findley consultant you regularly work with or Bruce Davis at Bruce.Davis@findley.com or 419.327.4133.

© 2019 Findley. All Rights Reserved.

Posted December 23, 2019

Affordable Care Act PCORI Fee Due July 31

As a reminder, the ACA developed the Patient-Centered Outcomes Research Institute (PCORI), whose mandate is to improve the quality and relevance of evidence available to help patients, clinicians, caregivers, employers, insurers, and policy makers make informed health decisions. In order to fund the comparative effectiveness research, the ACA imposes an annual fee, which is paid to the IRS. This year the due date is July 31, 2019.

Don't miss the PCORI fee deadline on July 31, 2019

If a plan is fully insured, then the health insurer is responsible for paying the fee. For self-insured plans, the plan sponsor (generally the employer) is responsible for paying the PCORI fee.

For self-insured health plans, the fee is calculated using the average number of total lives covered by the plan (both employees and dependents). The requirement for calculating the total fee is to use one of the following three calculation methods:

  • Actual count method
  • Snapshot method
  • Form 5500 method

Plan Sponsors should review all three methods to determine the lowest amount to be paid. The amount to pay depends on the plan year end as outlined below:

  • Plan years ended 1/1/2018 – 9/30/2018:
    $2.39 per covered life (including spouses and children)
  • Plan years ended 10/1/2018 – 12/31/2018: $2.45 per covered life (including spouses and children)

The PCORI fee is set to expire for plan years that end before October 1, 2019, therefore this will be the final PCORI filing for calendar year-end plans.

The PCORI fee is filed using IRS Form 720 (https://www.irs.gov/pub/irs-pdf/i720.pdf). The payment voucher (720-V) should indicate that the tax period for the fee is the “second quarter” to avoid the IRS’s software system marking this as a tardy filing notice.

For more information, contact Dave Barchet at 216.875.1914, Dave.Barchet@findley.com or John Lucas at 615.665.5329, John.Lucas@findley.com or the Findley consultant with whom you normally work with.

Published June 7, 2019

© 2019 Findley. All Rights Reserved.

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Employer Sponsors of Health Benefits Part 2: More Gridlock Ahead

Regardless of what side of the political spectrum you find yourself, you would probably agree that to say Washington, DC is in gridlock is an understatement. We are not going to assign blame to any particular party for the impasse. Instead, we’ll focus on how employer-sponsored health benefits could be impacted in 2019-2020 and by the results of the next Presidential election in November 2020.

.We will look at how the Trump Administration’s executive actions between now and then could shape the direction of employer-sponsored health benefits. We will also speak to how the makeup of the U.S. Supreme Court (SCOTUS) could impact the outcome of any related legal challenges.

On February 27, Representatives Pramila Jayapal (D-WA) and Debbie Dingell (D-MI) introduced the Medicare for All Act of 2019. This bill goes far beyond the Affordable Care Act (ACA) by eliminating employer-sponsored health plans. In fact, Healthcare.gov (i.e. the ACA Marketplace or Exchange) would also be eliminated as everyone is moved to Medicare within two years. Given the Democrats have a 235-197 majority in the House of Representatives (there are 3 vacancies), it’s quite possible the Medicare for All bill will pass. However, the Republican majority in the U.S. Senate (53-47) likely means this bill would not pass the Senate—if it ever makes it to the floor for a vote. Other health care-related bills passed by the Democrat-controlled House will likely be opposed by the Trump Administration and the Senate Republicans too.

The Trump Administration will continue issuing healthcare-related Executive Orders (EO), such as the one which changed the maximum coverage period for short-term limited duration insurance plans from 12 to 36 months. Another example is the EO that would allow organizations (beyond churches and religious employers) to avoid the ACA’s contraceptive mandate based on religious or moral grounds. Predictably, this EO was challenged by Attorneys General from five states where the governor is a Democrat and/or the legislatures are primarily controlled by Democrats. As a result, two federal district courts have issued nationwide preliminary injunctions to block this order.

The Trump Administration is also likely to continue directing the DOL/HHS/Treasury Departments to issue regulations or guidance that are consistent with its objectives and policies to control healthcare costs and improve access to affordable coverage. One example is the proposed rules to expand the use of Health Reimbursement Arrangements (HRAs) by employers of any size to pay for individual health insurance premiums. Another example is the possibility the HHS Secretary could relax prescription drug importation rules to give Americans the ability to purchase their prescriptions from abroad at a fraction of US prices.

Although Democrats would probably not oppose prescription drug importation because it will help reduce costs for their constituents, they are likely to challenge the HRA measure. Democrats are concerned about their constituents losing comprehensive, ACA-compliant coverage through their employers (at least until they can get them moved on to Medicare) in exchange for a stipend that may not be sufficient to cover the premiums for an individual health insurance policy (probably with higher deductibles and a more narrow provider network). And speaking of challenges, you may recall that Attorneys General from eleven states and the District of Columbia filed suit to block the Administration’s endorsed DOL/HHS/Treasury regulations on Association Health Plans (AHPs), because they believe AHPs will undermine the ACA Marketplace and result in people being covered under non-ACA compliant plans.

Earlier, we mentioned the makeup of SCOTUS will determine the fate of court challenges to the Trump Administration’s (and that of future Administrations) healthcare-related EOs and regulations. Today, the Administration enjoys an advantage with the recent appointments of Justices Gorsuch and Kavanaugh. However, with Chief Justice Roberts showing a tendency to be a more moderate voice, that advantage is narrow. What if President Trump has the opportunity to appoint another conservative Justice before the November 2020 election and that nomination is approved by the Republican majority in the Senate? If that happens, it’s more likely the Administration’s EOs and regulations will be upheld in the future.

Learn more on possible 2020 election scenarios by reading the third article in this series: Employer Sponsors of Health Benefits: Part 3: Possible 2020 Election Scenarios.

Questions? Contact the Findley consultant you normally work with, or Bruce Davis at 419.327.4133, Bruce.Davis@findley.com.

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Posted March 7, 2019

ACA Ruled Unconstitutional – Now What for Employers?

On December 14, 2018, the much-anticipated decision was issued in Texas v. United States in which the District Court found the Patient Protection and Affordable Care Act (ACA) unconstitutional given the current terms of the individual mandate. 

From an employer perspective, this case does not require or even provide opportunities for change as the ACA continues to be the law of the land as the case works its way through the system. As such, employers should continue their health coverage strategies per the ACA and comply with all of its requirements. 

The Case

The key issue in the case was the individual mandate.  The plaintiffs in the case brought action arguing that the individual mandate was unconstitutional and, as a result, the ACA is unconstitutional due to the individual mandate not being severable from the remainder of the ACA. This case was essentially a result of the Tax Cuts and Jobs Act of 2017 (TCJA), as under the TCJA the individual mandate penalty under the ACA was reduced to zero (effectively eliminating the penalty).

United State District Court Judge Reed O’Connor spent a fair amount of time in the decision discussing the National Federation of Independent Business v. Sebelius case where the Supreme Court focused on the individual mandate penalty and found it in the nature of a tax. However, with the TCJA doing away with the penalty, the questions became (1) whether the individual mandate itself was constitutional with a zero dollar penalty (or tax) and (2) whether the entire ACA itself was constitutional in the event that the individual mandate was unconstitutional (i.e. the severability issue).

The Court’s two key findings in Texas v. United States (in the words of Judge O’Connor):

(1) “The Court today finds the Individual Mandate is no longer fairly readable as an exercise of Congress’s Tax Power and continues to be unsustainable under Congress’s Interstate Commerce Power. The Court therefore finds the Individual Mandate, unmoored from a tax, is unconstitutional.”

(2) “The Court finds the Individual Mandate ‘is essential to’ and inseverable from ‘the other provisions of’ the ACA.”

Post-Decision Considerations

From a litigation perspective, the next step is an appeal to the Fifth Circuit (and the Supreme Court thereafter).  We may be years from a resolution on this issue as the case makes its way through the legal system. Right now, the ACA continues to “live” as is.

Posted to December 26, 2018

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Affordable Care Act Preventative Services Updates for 2019

Section 2713 of the Affordable Care Act (ACA) requires group health plans and health insurers to provide coverage for a variety of preventative care services without any cost sharing requirements (deductibles,coinsurance, and copayments). This list of preventative care receives yearly additions and modifications, which must be integrated into health plans within the following two years. These recommendations are made by organizations such as the U.S. Preventative Services Task Force, Bright Futures, and the Advisory Committee on Immunization Practices. Here are some of the recommendations that must be integrated into health plans for the 2019 calendar year:

  • Preeclampsia screening through blood pressure tests
  • Obesity screenings for children and adolescents 6 years and older
  • Vision screening in children ages 3 to 5 to detect amblyopia or its risk factors
  • Influenza vaccine for adolescents
  • Hepatitis B vaccine for adolescents
  • Human papillomavirus (HPV) vaccine for adolescents

This year’s updates appear to focus on improving women’s health during pregnancy and adolescent health in general. While the list above is not exhaustive, here area few resources if you would like to find out more:

  • A list of all recommendations from the U.S. Preventative Services Task Force may be found here.
  • The approved Periodicity Schedule from Bright Futures may be found here
  • ACIP Vaccine Recommendations and Guidelines may be found here
  • Current preventative services for adults, women, and adolescents may be found here

Questions? Contact the Findley consultant with whom you normally work or Kadin Llewellyn at 419.327.4103, Kadin.Llewellyn@findley.com.

Posted December 18, 2018

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It’s Déjà Vu for ACA Reporting – 2018 Due Date Extension

On November 29, 2018, the IRS released Notice 2018-94 announcing an extension of furnishing 2018 Forms 1095-B and 1095-C, from January 31, 2019, to March 4, 2019. This extension is basically identical to the extension the IRS provided for furnishing the 2017 Forms 1095-B and 1095-C in Notice 2018-06. As they indicated last year, the IRS encourages employers and other coverage providers to furnish the Forms “as soon as they are able.”

Notice 2018-94 does not extend the due date for employers, insurers, and other providers of minimum essential coverage to file 2018 Forms 1094-B, 1095-B, 1094-C, and 1095-C with the IRS. The filing due date for these forms remains February 28, 2019 (April 1, 2019, if filing electronically).

In Notice 2018-94, the IRS once again indicates that good faith reporting standards will apply for 2018 reporting. This means reporting entities will not be subject to penalties for incorrect or incomplete information if they can show they have made good faith efforts to comply with the 2018 Form 1094 and 1095 information reporting requirements. This relief pertains to missing and incorrect taxpayer identification numbers, dates of birth, and other required return information. However, no relief is provided where there has not been a good faith effort to comply with the reporting requirements, or where there has been a failure to file an information return or furnish a statement by the applicable due date.

Note that due to the extension, a taxpayer may not receive his or her Form 1095-B or 1095-C by the time they file their 2018 tax return. The Notice states, that in such case, the taxpayer may rely on other information received from his or her employer or coverage provider for purposes of filing his or her return.

In addition, the Notice points out that the individual responsibility payment (tax) has been reduced to zero for the months beginning after December 31, 2018. As such, the Treasury and IRS are studying whether and how the reporting requirements should change (if at all) in the future.

Questions? Contact the Findley consultant you normally work with, or Bruce Davis at bruce.davis@findley.com, 419.327.4133.

Posted December 5, 2018

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IRS Issues Annual Increase to PCORI Fee

As part of the Affordable Care Act, the fee to fund the Patient-Centered Outcomes Research Institute (PCORI) has been in effect since 2012, and by now, plan sponsors and insurers are very familiar with it. The fee itself was imposed as part of Sections 4375 and 4376 of the Internal Revenue Code, and is scheduled to be in effect for plan years ending after September 30, 2012 and before October 1, 2019. The amount of the PCORI fee is equal to the average number of lives covered during the plan year multiplied by the applicable dollar amount for the year. Of note, the applicable dollar amount is indexed each year.

The IRS has recently released Notice 2018-85; stating that for plan years ending on or after October 1, 2018, and before October 1, 2019, the fee will be increased from $2.39 to $2.45 per covered member. This will be the used to calculate the amount payable in July 2019 using the IRS Form 720. View the IRS notice directly by clicking here. Please also note that for calendar year plans, the 2018 plan year is the last year for which PCORI fees will apply given the sunset of the fees.

Posted November 8, 2018

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