Year-End Policy Developments Impact Employer-Sponsored Health Plans

Year-End Policy Developments Impact Employer-Sponsored Health Plans

At the close of 2019, several critical legislative developments happened that will impact group health insurance plans in the year ahead. As part of the end-of-year appropriations and tax bill, H.R. 1865, Congress approved the full repeal of three Affordable Care Act (ACA) taxes. The excise tax on high-cost health plans (a.k.a. the “Cadillac tax), the health insurance provider fee (a.k.a. the HIT tax), and the medical device tax, will all end due to this legislation. In the same measure, Congress extended the ACA’s Patient-Centered Outcomes Research Institute (PCORI) fee through 2029. New Jersey policymakers also advanced legislation to limit small group self-funding options in the state moving forward.

The Cadillac tax was a 40 percent excise tax on high-cost employer-sponsored health plans initially slated to go into effect on January 1, 2018. Twice delayed by Congress, now it is abolished for good. The HIT tax and a national excise tax that increased the cost of medical devices have both been in place intermittently since 2014. The HIT is a federal premium tax on all fully-insured health plans that adds upwards of $500 a year to the cost of family coverage. It will still be in place for the 2020 plan year, but fully-insured coverage offered in 2021 will be free of the HIT.

The same appropriations bill also ensures that businesses will pay the PCORI fee for another ten years. This annual assessment on all private health plans helps fund a federal research institute that evaluates the effectiveness of various medical treatments. Initially, the PCORI fee expired after the 2019 tax year, but this measure extends it through 2029 to keep the institute running.  Health insurers pay the PCORI fee for individuals and companies with fully-insured private coverage. Businesses with self-funded coverage must calculate and pay the excise tax annually themselves by filing IRS Form 720.

Finally, in New Jersey, just before adjourning for 2019, the State Legislature amended–and then rapidly advanced–legislation to limit stop-loss insurance coverage for small employers.  S.3270 and its companion, A. 5095, are still working their way through the policy process, but it appears a version of these two measures will become law in the Garden State before the end of January 2020.  As of now, it seems that small group stop-loss policies (and related self-funded and level-funded plans) will be allowed, but with significant restrictions.  We are watching this legislation closely and will let clients who might be affected know about their options once finalized.