BY: HUB's EB Compliance Team

The Affordable Care Act (“ACA”) had a busy week (or maybe just a busy few days). First, there was a ruling on its constitutionality. Second, several ACA amendments snuck their way into the broader spending bills used to fund the government.

Big Day 1: ACA Individual Mandate Unconstitutional, but No Impact for Now

Late on December 18, the Fifth Circuit Court of Appeals issued its decision in the Texas v. U.S. case. In short, the court held that ACA individual mandate is unconstitutional. However, it sent the case back to the District Court for a more careful analysis of which provisions of the ACA should actually be severed from the individual mandate and survive.

Even with this decision, there is no immediate effect for employers. There is no nationwide injunction and the ACA remains the law of the land for the time being.

At the lower court level, the District Court had concluded the entire ACA should be invalidated. This latest opinion says the District Court did not perform a detailed enough analysis to reach that conclusion. As a result, the Fifth Circuit is asking the District Court to go back through the ACA. The Fifth Circuit wants the District Court to engage in a more detailed analysis and explain why certain provisions should, or should not, survive.

What’s Next?

Again, for employers, there is still nothing to do at this point except await the outcome. 

This decision means that the litigation will continue. The next potential steps are many:

  • The parties defending the ACA could appeal to the Supreme Court. They would argue the individual mandate is not unconstitutional. However, the Supreme Court is likely not to take the case without first reviewing the more detailed analysis by the District Court of which parts of the ACA should be severed and survive.
  • The parties challenging the ACA could appeal to the Supreme Court. They could argue that no further analysis is necessary and the whole statute should be struck down. Again, the Supreme Court is likely not to take the case for the same reason.
  • The District Court will conduct its analysis and strike down the most relevant employer provisions. In particular, the District Court could conclude (as it did originally) that the ACA employer mandate should not survive.
  • The District Court could conduct its analysis and the most relevant employer provisions remain intact. This would basically leave employers where we are now.

As before, the bottom line is this: until a final decision is issued (likely by the Supreme Court), employers need to continue with their ACA compliance obligations. However, keep an eye out, because this fight is not yet over. 

Big Day 2: Spending Bills Contain ACA Changes

In addition, as this week (and, conveniently, the Congressional legislative session) wound down, Congress passed, and the President is expected to sign, a pair of government funding bills that made changes to the ACA. Most of the changes are positive for employers.

The Good

First, the good news. The following taxes were removed from the ACA:

  • The so-called “Cadillac Tax” on high-cost health plans. This had long been a thorn in the side of employers since it really taxed employers with higher claims, regardless of whether the plan benefits were particularly rich. Congress had kicked the effective date down the road a couple of times. Now it is gone for good.
  • The Health Insurance “Fee” (really, a tax) that has applied to insurance carriers for years, and passed along to fully-insured plans, will continue in 2020, but not after that. This will hopefully help ease the cost of health insurance.
  • The Medical Device Excise Tax. While this doesn’t directly impact most employers, it may have an indirect impact on the cost of care by reducing the cost of medical devices.

The Not as Good

However, the spending bills also added back the Patient Centered Outcomes Research Institute (or PCORI) fee for another 10 years. We discuss this fee more here. For many plans, they thought they had made their final PCORI fee payment earlier this year. However, this fee will continue now for another ten years.

While this is not as good in the sense that it is another cost to employers, this could end up being positive. If the PCOR Institute can uncover research that leads to better health outcomes, that may ultimately bring costs down. 

HUB will keep an eye on these developments and provide updates as appropriate. If you have any questions, please contact your HUB Advisor. View more compliance articles in our Compliance Directory.

NOTICE OF DISCLAIMER

The information herein is intended to be educational only and is based on information that is generally available. HUB International makes no representation or warranty as to its accuracy and is not obligated to update the information should it change in the future. The information is not intended to be legal or tax advice. Consult your attorney and/or professional advisor as to your organization’s specific circumstances and legal, tax or other requirements.