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Cadillac and Other ACA Taxes Repealed; PCORI Extended

December 23, 2019

The President has signed 2020 spending legislation (the 2020 Further Consolidated Appropriations Act), repealing three Affordable Care Act (ACA) related taxes: the 40% “Cadillac” Tax on high-cost employer provided health coverage, a 2.3% excise tax on medical devices, and the Health Insurance Tax (HIT) on fully-insured plans. Another ACA change in the package includes an extension of the annual employer fee for the Patient-Centered Outcomes Research Institute (PCORI).

Cadillac Tax
The Cadillac Tax, a tax on high-cost health care plans, was originally set to take effect in 2018 but was delayed twice until 2022. The Tax is now permanently repealed and will never go into effect. It was originally passed as an ACA provision to finance health care expansion and control the cost of health care. It’s estimated that the repeal of the Cadillac Tax will cost $200 billion over 10 years.

Health Insurance Tax (HIT)
The HIT tax has gone into effect and been delayed several times. It was originally effective beginning in 2015 but was under a moratorium for 2017 and 2019. Although the HIT is levied on insurers, the tax is passed through to employers and employees in the form of increased health insurance costs. The HIT is now permanently repealed as of January 1, 2021, however, the HIT will remain in effect for the 2020 plan year. It’s estimated that the repeal of the HIT will cost almost $151 billion over ten years.

PCORI
The Patient-Centered Outcomes Research Institute (PCORI) fee was established as a part of the ACA to fund medical research. Insurers and employers with self-insured plans are subject to the fee. The last PCORI fee payment was expected to occur on July 31, 2019 (or July 31, 2020 for non-calendar year plans). The PCORI fee is now extended for another 10 years, which means employers with self-insured plans must continue paying the administratively burdensome PCORI fee.

In other significant ACA news, a federal court of appeals recently determined the ACA’s “individual mandate” to be unconstitutional and asked the lower court to decide whether other ACA provisions can stand. This means the future of the ACA remains uncertain, as this case will likely be decided by the U.S. Supreme Court many months or even years from now. In the meantime, ACA provisions, including the “employer mandate” and related reporting requirements (Forms 1095 and 1094) are still applicable.

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