Spring 2020 Legislative Round Up
2019 Year End Spending Bill
Repeal of Several Taxes: The Cadillac tax, the Health Insurer Industry Tax (HIT) and the 2.3% medical device tax
As a reminder, the Cadillac Tax was set to take effect in 2022 after a few delays, and would be applied at 40% to employer sponsored plans exceeding certain threshold amounts ($11,200 for single tier coverage, and $30,100 for all other tiers of coverage). These thresholds would have included funding arrangements where employers contribute any amount of money to HSAs, HRAs, and FSAs as well. Taking this tax off the docket will be a huge relief to employer plan sponsors.
Though the HIT will be repealed in the future, it's worth noting that it is still in effect for 2020. This means employers will still see a premium increase associated with HIT in their 2020 plan renewals.
The ACA (via IRC Section 4191) imposed a tax on certain medical devices. This 2.3% tax began in 2013, followed by a 2 year moratorium for 2016 and 2017, which was then extended in mid January 2018, to last through the end of 2019. The spending bill will permanently remove this tax. Though this more directly affects manufacturers, the trickle down impact will benefit consumers as well.
PCORI Is Back Through 2029
The Patient-Centered Outcomes Research Institute (PCORI) fee has been in effect since 2012, first payable in July, 2013.
The fee applies to all health plans, and is paid by the carrier for fully insured medical plans, and the employer directly for self funded medical plans, and HRA plans. The fee will now apply for the next decade, expiring in 2030. This fee is currently $2.45, and will increase over the coming decade.
All employers with health plans beginning between February and October (i.e. plan years ending between January and September) were already required to pay $2.45 per covered member in July, 2020 (based on the headcounts from their 2018 plan years).
Now, employers with plan years beginning between November and January (ie ending between October and December) will also need to pay this fee in July, 2020 (based on the headcounts from their 2018-2019 plan years). The amount due for the latter employer plan years will be determined.
Lack of Surprise Bill Measure
What is more surprising is the fact that the bill does not accommodate a ‘surprise medical bill’ prohibition, nor any measures to reduce prescription drug price increases for the coming year. Many states have implemented their own prohibitions on the ability of out of network providers to bill patients for their services under certain circumstances, such as emergency medical care, and when patients have selected an in-network facility for treatment. Though HR 861 (which contained provisions to ban this type of medical billing to patients) was introduced in the House last January, and then given more attention again in November, it was noticeably absent in the final legislative bills.Two bills are circulating in Congress and we may see some action in this area again in the coming months.
News from SCOTUS
Texas v Azar Update
Recap of the case
In December 2018 a Federal Court in Texas ruled the ACA is unconstitutional (Justice O’Connor relied heavily on the 2012 case holding the individual mandate a ‘tax’. Because the ‘tax’ was removed in 2017 (effective in 2019), it can no longer be called a tax, and this entire portion of the law is beyond the power of Congress to enact.)
In July, 2019 the appeal was heard by the 5th Circuit 18 state attorneys general challenged the ACA’s individual mandate as being beyond the power of Congress, and argued that with an unconstitutional provision, the entire ACA is not severable and thus unconstitutional as a whole.
In December, 2019 The 5th Circuit upheld the lower court ruling against the ACA, and directed the lower court to specifically decide if the entirety of the ACA, without the individual mandate, can stand (a concept known as severability).
Because this creates much uncertainty for the industry, not to mention employer health plan sponsors who often craft their benefits offerings months to years in advance, the House and several states petitioned the Supreme Court to intervene on a faster timeline than usual.
As of January 21, 2020 the Supreme Court has declined to expedite their normal review process, meaning they will respond to the petitions by early March, and if granted, take oral argument in a later term. This is significant because it means the ACA will stand in limbo through much of the 2020 calendar year. Employers should still make all efforts to comply with the ACA as it stands presently, including filing of forms 1095-C and 1094-C.
NOTE as of 3/2/20, SCOTUS has officially granted leave to appeal meaning they will likely hear the case in the fall of 2020.
Rutledge v Pharmaceutical Care Management Association
The Supreme Court granted cert and will address the issue of ERISA preemption in the state’s ability to regulate pharmacy benefit managers
Reminder: ERISA is the federal law that regulates all health plans offered by employers (with a few exceptions). ERISA takes priority over any similar, or directly conflicting state laws. This is intended to create uniformity and predictability for employer plans sponsors who may operate plans in many states.
Arkansas enacted a law applying to TPAs and claims processors for drug plans, giving pharmacies the right to challenge reimbursements they received from PBMs
The D.C. and Eighth Circuits hold that all PBM regulation is preempted by ERISA (meaning states cannot regulate in this area, because the state law “ relate[d] to and has a connection with employee benefit plans”), while the First Circuit holds that none is preempted.
This will be significant because the court will define what ‘relates to’ a benefit plan means, as there is still uncertainty in this area
Main Community Health Options v U.S.
SCOTUS will weigh in on whether or not insurers will receive the funds (upwards of $12 billion) they claim to be owed under the ACA’s marketplace cost sharing reduction/ risk corridor program from 2014 through 2016.
Trump v PA and Little Sisters of the Poor v PA
The contraceptive mandate has had perhaps more litigation than other sections of the ACA; this is still up for review following a state injunction
Employer Mandate
2020 Penalty amounts as follows:
4980H(A)- failure to offer minimum essential coverage to 95% of full time employees: $2,579 x all employees (minus 30)
4980H(B)- failure to offer coverage meeting minimum actuarial value (60% AV) OR failure to offer coverage at an ‘affordable’ rate: $3,869 x number of employees actually receiving a subsidy
For employers that reply on the Federal Poverty Line for Affordability Testing and 1095-C reporting:
The FPL from 2019 was $12,490
The FPL for 2020 is $12,760
For employers with calendar year plans using FPL for affordability testing, and the ‘qualifying offer method’ for 1095-C reporting, they must use the 2019 FPL amounts for their 1/1/20 renewal. This means the monthly max an employee can be charged for single tier, low plan coverage in 2020 is $101.79 (9.78% x $12,490/12)
For employers with non-calendar year plans renewing in 2020, the monthly max an employee can be charged for single tier, low plan coverage in the 2020 plan year is $103.99 (9.78% x $12,760/12)
NO SOL for 4980H
IRS stated in February there is NO statute of limitations on the 4980H penalty (this means IRS could come looking to assess a penalty at any date in the future, for any penalty dating back to the beginning to 2014 tax year).
Employers need to keep very accurate records, waivers, and enrollment data in light of this announcement