PPACA Taxes Delayed
Who: The delay or elimination of several PPACA taxes and funding of programs will potentially affect anyone with individual, group, or other forms of health insurance, whether self-insured or fully insured.
When: Signed into law on December 15, 2015. Effective dates vary:
1. 40% Excise Tax on high cost insurance (“Cadillac Tax”) – delayed initial start 1/1/2018 to
1/1/2020.
2. 2.3% Excise Tax on certain medical devices – eliminated for 2016 and 2017.
3. Health Insurance Provider Fee (“Premium Tax”) - eliminated for period 2017.
4. Risk Corridor Payments to Insurers – restrictions on use of federal funding.
5. Independent Payment Advisory Board (“Death Panel”) – defunded Medicare board for 2016.
What: The Consolidated Appropriations Act of 2016 made several key changes to PPACA taxes and program funding. The law delays and temporarily eliminates certain taxes initially used to fund PPACA. The loss of tax revenue does not affect PPACA benefits, it only tends to increase the projected federal budget deficit.
Executive Summary:
1. The Cadillac Tax was to go into effect on 1/1/2018. While heavily relied on to initially fund PPACA, there is bipartisan support to eliminate or minimize the impact of the 40% surcharge on high cost plans exceeding specific cost levels. The two year delay is an indication that future delays or outright repeal is likely.
2. The Excise Tax on Certain Medical Devices was originally imposed on the medical device industry as a trade off for expanded coverage of insurance under PPACA. It has been in effect since 1/1/2013. The impact of the industry is controversial. Some believed it only increased costs of needed items such as artificial joints and heart pacemakers. The tax has been eliminated for 2016 and 2017, but could be reinstated in 2018.
3. The Health Insurance Provider Fee (”PPACA premium tax”) is charged only on fully insured health plans. It has been in effect since 2014. The fee has been eliminated for one year (2017) and will automatically be reinstated in 2018 unless further legislation is enacted.
4. Under the 2015 Omnibus law, Risk Corridor Payments were limited to the fees that the program collects from insurers that have excess profits. If the excess profits payments are insufficient to offset losses from others, no additional government funding is allowed. Those restrictions were again placed in the 2016 Appropriations Act.
5. Independent (Medicare) Payment Advisory Board (IPAB), or Death Panel as some have referred to it, was not funded under the 2016 Appropriations Act. The Medicare Advisory Board has never been selected. The PPACA law gives HHS authority if the IPAB does not exist or make recommendations.
Actions: Employers need to factor in the uncertainty of a Cadillac Tax delay rather than repeal. Insurers need to consider lowering premiums from the delay in the Provider Fee. Insurers need to decide whether or not to offer products without the financial safety net of a federally supported risk adjuster. Medical Device companies need to consider lower prices during the moratorium on those taxes. Government agencies and watchdog groups will be checking to see if consumers realize lower costs from the elimination of these indirect taxes.
The information presented and contained within this article was submitted by Ronald E. Bachman, President & CEO of Healthcare Visions and Chairman of the IHC Editorial Advisory Board. This information is general information only, and does not, and is not intended to constitute legal advice. You should consult legal advisors to determine the laws and regulations applicable to your company. Any opinions expressed within this document are solely the opinion of the individual author.