2020 Further Consolidated Appropriations Act: Important Changes for Employer-Sponsored Health Plans

Keenan Briefings


2020 Further Consolidated Appropriations Act: Important Changes for Employer-Sponsored Health Plans

December 30, 2019

On December 20, 2019, President Trump signed into law the 2020 Further Consolidated Appropriations Act—spending legislation which also included important changes for employer-sponsored health plans, repealing three taxes enacted as part of the Affordable Care Act (ACA) and extending one.

  • Repealed -- Cadillac Tax. This measure would have imposed a 40% excise tax on plans with annual premiums exceeding $10,800 for individuals or $29,500 for a family. Implementation of the tax was supposed to happen in 2018 and has currently been delayed to 2022. While the Cadillac tax was never levied, its looming existence has made it very difficult for employers to plan future benefit levels and costs. Moreover, the way that the tax was structured would have led to many employer plans, not just the “gold-plated” ones, being subject to an excise tax in future years.
  • Repealed -- Health Insurance Tax (HIT). This provision, which went into effect in 2014, imposed an annual tax on health insurers. Actuarial analyses have found that the tax added to the cost of coverage purchased in all market segments, including individual, large and small employers. In 2018, Congress enacted a one-year suspension of the tax, but it was scheduled to go back into effect at the end of 2019. If it had not been not repealed, the HIT would have imposed a $16 billion tax on health plans in 2020.
  • Repealed -- Medical Device Tax. This was a 2.3% excise tax on the value of medical devices (x-ray machines, hospital beds, MRI machines) sold within the United States. Since it went into effect in 2013, it was suspended twice. Critics of the tax cite research that shows that it lowered the medical device industry’s research and development spending.
  • Extended -- Patient-Centered Outcomes Research Institute (PCORI). This annual fee is a tax on health plans, which was included in the ACA as an initial funding mechanism for the federal program which funds research on the comparative effectiveness of medical treatments. The fee (which is set annually and was $2.45 per person covered by the plan in 2019) is paid by insurers for fully-insured plans and employers sponsoring self-insured plans. It was set to sunset this year, with the last payment due on July 31, 2019 for calendar year plans and July 31, 2020 for non-calendar year plans. The Appropriations Act extends the PCORI fee for another 10 years, extending the financial and administrative burden on insurers and employers.

Keenan & Associates is not a law firm and no opinion, suggestion, or recommendation of the firm or its employees shall constitute legal advice. Clients are advised to consult with their own attorney for a determination of their legal rights, responsibilities and liabilities, including the interpretation of any statute or regulation, or its application to the clients’ business activities.