The future of the Affordable Care Act (ACA) remains uncertain, as Congress has taken steps towards its repeal and replacement. While much remains unknown, there are some definitive changes for 2017 that employers should note.
An effort to replace the ACA with the American Health Care Act (AHCA) passed the House of Representatives and is now under consideration in the Senate. While the overall future of the legislation is unclear, specific changes to some taxes and fees have taken effect already:
- Implementation of the so-called “Cadillac tax,” which was to be levied on higher-cost group coverage, has been delayed for two years, until 2020. It is possible that the tax will be repealed completely before that time.
- Similarly, a moratorium has been applied to the health insurance provider’s fee and the medical devices excise tax. These will not apply for 2017.
- Reinsurance fees do not apply for 2017 and beyond, however, the 2016 fees will still need to be paid in 2017.
Regarding the Cadillac tax, the delay simply extends the existing situation. This 40 percent excise tax on high-cost group plans was to have taken effect in 2013 but was delayed until 2018 immediately following the passage of the ACA. It has never actually been in effect.
In contrast, the provider’s fee, an annual, nondeductible fee on the health insurance sector, has been in effect since 2014 and in many cases has been passed along to employers in the form of higher insurance rates. Therefore, this one-year moratorium may result in significant savings on health coverage. Similarly, the 2.3 percent excise tax on medical devices, generally paid by manufacturers and importers, has been in place since 2013 but was suspended for tax years 2016 and 2017.
Health insurance issuers and self-funded group plans were required under the ACA to pay fees in support of a reinsurance program to help stabilize premiums for the first three years of the ACA. This program was operational through 2016, so reinsurance fees do not apply for 2017 and beyond. However, for those opting to pay 2016 fees in two installments, the second payment remains due on November 15 of this year.
We will continue to keep you up to date on changes to this important legislation as they occur. If you have any questions about health coverage, contact Consolidated.