In this episode of the Empowering Plans podcast, Jen and Nick discuss significant developments in nondiscrimination regulations, and the implications for those in the self-funding industry. They talk through the evolution of Section 1557 of the ACA, the new final rule issued by HHS, the Supreme Court’s recent decision on Title VII of the Civil Rights Act, and the looming legal challenges as the health care field attempts to reconcile what we’re hearing from the Supreme Court and HHS. They piece together what all this means for employer-sponsored plans, and offer some advice as to how employers and plans should respond.
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By: Philip Qualo, J.D.
The Trump Administration has been very transparent in their efforts to undermine and dismantle the Affordable Care Act (ACA). There have been several milestones in these efforts, such as essentially gutting the ACA Individual Mandate by reducing the penalty to $0 for individuals who forego health plan coverage for the tax year. The Trump Administration has also passed on the torch to the federal courts, as the 5th Circuit Court of Appeals has recently ruled that the Individual Mandate is unconstitutional, and has kicked the case back to the lower courts to determine whether other parts of the ACA should be overturned as well.
However, there appears to be at least one aspect of the ACA that the Trump Administration appears to support – the revenue generated by PCORI fees. The Patient-Centered Outcomes Research Institute (PCORI) fee was established as a part of the ACA to fund medical research. Insurers and employers with self-insured plans are subject to the fee. The last PCORI fee payment was expected to occur on July 31, 2019 (or July 31, 2020 for non-calendar year plans). The ACA mandated payment of an annual PCORI fee was intended to be a temporary measure as it only applied to plan years ending after September 30, 2012, and before October 1, 2019, to provide initial funding for the Washington, D.C. based institute.
This past year, we have consistently advised our clients that PCORI fees would be a thing of the past – based on the law at that time. However, each time I wrote or spoke those words I had this gnawing feeling in my gut. Although the PCORI fee was intended to be a temporary assessment, it was difficult for me to imagine that we would let a revenue-generating assessment just slowly fade away into oblivion.
Well… it looks like I was right (I should have placed a wager on this!). On December 20, 2020, President Trump signed 2020 spending legislation (the 2020 “Further Consolidated Appropriations Act”), repealing three ACA related taxes: the 40% “Cadillac” Tax on high-cost employer-provided health coverage, a 2.3% excise tax on medical devices, and the Health Insurance Tax (HIT) on fully-insured plans. Although these cuts would appear to be in line with the Administration’s efforts to obliterate the ACA’s existence, for some reason, the Trump Administration make a last-minute decision to preserve and extend the PCORI fee for another 10 years through the Act. This means employers with self-funded plans must continue paying the administratively burdensome PCORI fee.
Although the future of the ACA is still a question mark at this time, based on this recent extension of a small portion of the ACA, I think it is fair to conclude that PCORI fees are here to stay. In about 9 years from now, whether the ACA is still here or not, I predict PCORI fees are either extended … again, or written into another legislation to make it a permanent excise tax on health plans.
Please note, that the next PCORI fee is due by July 31, 2020. The IRS has yet to announce the rates for this year, so say tuned!