2018 Health Care Reform Update Log

 

This timeline notes the substantive developments in health care reform under the Trump administration. It is updated regularly, so you don’t miss a beat.

December 17, 2018
Federal District Court Rules ACA Unconstitutional Under the Tax Cuts and Jobs Act
On December 14, 2018, a judge in the U.S. District Court for the Northern District of Texas ruled that when the Tax Cuts and Jobs Act of 2017 reduced the Affordable Care Act’s (ACA) individual shared-responsibility payment for not obtaining health insurance to $0, it rendered the entire ACA unconstitutional. The court’s rationale was that when the U.S. Supreme Court upheld the ACA in its 2012 decision, National Federation of Independent Business v. Sebelius, 567 U.S. 519 (2012), it found the individual mandate constitutional under Congress’s power to tax. The Texas court reasoned that without a dollar amount attached to the individual mandate the provision ceased being a tax, making it unconstitutional. The court then found the rest of the ACA inseverable from the individual mandate and therefore also unconstitutional. Although the individual mandate is critical support for the ACA’s guarantee issue and community rating rules, most of the ACA’s sweeping reforms are not tied to the individual mandate. The breadth of the court’s order does not impact an employer’s ongoing compliance obligations, including ACA reporting. The ACA will remain in effect throughout the course of this litigation, as it has with previously litigated ACA cases.

The case was originally filed by 20 state Republican attorneys general and two individuals in February 2018. A coalition of 16 states and the District of Columbia, led by California, intervened to defend the law. Defendants are expected to appeal the decision to the U.S. Court of Appeals for the Fifth Circuit but the issue is likely to reach the U.S. Supreme Court.

The full opinion is available here.

Compliance Alert is presented by the Compliance Practice Group of Alliant Employee Benefits

December 4, 2018
Extension of Due Date for Furnishing 2018 Forms 1095 B and C to Employees
The Department of the Treasury and the Internal Revenue Service is providing an automatic extension to employers, insurers and other providers of minimum essential coverage to furnish the 2017 Forms 1095-B and 1095-C to individuals. A 30-day extension is being provided, from January 31, 2019 to March 4, 2019.

Because of the extension, some individual taxpayers may not receive Form 1095-B or Form 1095-C by the time they are ready to file their tax return. Taxpayers may rely on other information received from their employer or other coverage provider for purposes of filing their returns. They do not need to wait to receive the Forms before filing their returns, and they will not be required to amend their income tax returns once they receive their forms.

The government has determined there is no similar need to provide an extension to file forms 1094-B, 1095-B, 1094-C and 1095-C with the IRS. Therefore, the original filing due date to the IRS remains February 28, 2019, if not filing electronically, or April 1, 2019, if filing electronically. However, an automatic extension of the filing date is available as long as the filing entity files Form 8809 in a timely fashion.

For more information regarding this extension, please read IRS Notice 2018-94.

November 16, 2018
IRS Announces Flexible Spending Account and Commuter Benefit Limits for 2019
The IRS has announced the inflation-adjusted limits for 2019 for flexible spending accounts (FSAs), adoption assistance and commuter benefit accounts. Health saving account (HSA) limits were released earlier this year. Please see the chart below for a 2018-2019 comparison of plan features. These and other inflation adjusted limits are set forth in IRS Rev. Proc. 2018-57.

June 19, 2018
DOL Issues Final Rule Expanding Access to Association Health Plans
On June 19, 2018, the Department of Labor (DOL) issued their final rule that broadens the definition of “employer” under the Employee Retirement Income Security Act (ERISA) to allow businesses and sole proprietors to band together on the basis of geography and industry to form association health plans (AHPs), starting on September 1, 2018.

AHPs could be of particular interest to small employers, as they’d potentially benefit from economies of scale that would result in more favorable deals with insurers, including the enhanced ability to self-insure and obtain lower premiums and a wider array of insurance options. These plans are not subject to certain Affordable Care Act mandates, including the requirement to cover essential health benefits.

On January 4, the DOL had announced a Notice of Proposed Rulemaking, prompted by President Trump’s executive order of October 2017 that, among its directives, called on regulators to consider issuing rules to expand access to AHPs. During the commenting period, several insurance and consumer groups –such as the National Association of Insurance Commissioners and the National Governor’s Association—noted their concerns with the proposal. Principally, they argued that AHPs would disrupt state insurance governance and destabilize small group markets and that, because these plans are exempt from state consumer protections and solvency requirements, these plans would provide insufficient protection to consumers.

Update: On June 20, the attorneys general of Massachusetts and New York announced that, over the next few weeks, they intend to sue the Trump administration over the DOL’s final rule. They believe the rule is unlawful and would lead to fewer consumer health protections. These two attorneys general were among 17 others that submitted comments against the rule when it was first proposed. As such, they anticipate other states will join them in the law suit.

June 7, 2018
The Department of Justice Shows Its Support for Lawsuit Against Individual Mandate
The Tax Cuts and Jobs Act signed into law on December 20, 2017, which among its provisions reduces the individual mandate penalty to $0, seems to have motivated opponents of the Affordable Care Act (ACA) to continue their efforts to dismantle the law.

In February 2018, 20 Republican state attorneys general filed a lawsuit claiming that the entire ACA is unconstitutional now that there is no penalty to support the individual mandate. Led by Jeff Sessions, the Department of Justice (DOJ), in an almost unprecedented act of opposing existing federal law, declared its support of the lawsuit on June 7, 2018.

The DOJ is not claiming that the entire ACA is unlawful. Rather, the DOJ’s position is that when the reduction of the penalty to $0 takes effect in 2019, it will make the individual mandate unconstitutional, along with two other related provisions: the requirement to cover pre-existing conditions and the provision that requires insurers to charge premiums based on adjusted community rating. (With adjusted community rating, insurers cannot charge different rates for individuals based on health status, gender or certain other characteristics.)

May 28 and 30, 2018
Some States Keep an Individual Mandate, Regardless of Federal Support
So far, three states have implemented their own state-wide individual health insurance mandates, and it looks like more states are considering doing the same.

  • On May 28, Vermont passed an individual mandate. Starting in 2020, Vermont residents will be required to have health insurance coverage or be subject to state tax penalties.
  • On May 30, New Jersey passed similar legislation that takes effect in 2019.
  • Over a decade ago, Massachusetts was the first state to impose its own individual mandate.
  • Other states, including Hawaii, Connecticut, Rhode Island, Minnesota, California, and the District of Columbia, have each considered passing its own similar legislation.

While these laws do not have a direct impact on employers, state-level individual mandates will likely impact whether or not employees choose to enroll in coverage.

May 10, 2018
2019 Limits for HSA Contributions and HDHP Out-of-Pocket Spending
The Internal Revenue Service issued the 2019 contribution limits for health savings accounts (HSAs) and the deductible and out-of-pocket limits for high deductible health plans (HDHPs). HDHP coverage is required for an individual to be eligible for an HSA.

For 2019, the maximum contribution for an individual HSA will increase to $3,500 from the 2018 maximum of $3,450. The family contribution limit will increase to $7,000 from $6,900. Additionally, the out-of-pocket maximums allowed for a plan to qualify as an HDHP will increase to $6,750 for individuals and $13,500 for families, from $6,650 and $13,300, respectively.

The HSA catch-up contribution limit stays at $1,000 (it doesn’t adjust for inflation) and the minimum deductible amounts for an HDHP will remain the same as in 2018 for 2019.

Here’s a comparison of the plan features for 2018 and 2019. (Changes are noted in bold font.)

Revenue Procedure 2018-30 issued by the IRS

April 26, 2018
2018 HSA Family Contribution Limit Back to $6,900
The Internal Revenue Service (IRS) has reset the 2018 health savings account (HSA) contribution limit for family coverage to $6,900. (In March, they had decreased it to $6,850 from the original $6,900 to reflect an annual inflation adjustment based on C-CPI data.)

The Treasury Department and the IRS have walked back the $50 deduction in response to stakeholders’ concerns that a current year change would impose numerous unanticipated administrative and financial burdens on consumers and employers.

March 5, 2018
Change in 2018 HSA Family Contribution Limit
The Internal Revenue Service (IRS) has reduced the 2018 health savings account (HSA) contribution limit for family coverage to $6,850 (from the previously announced $6,900).

This change reflects an annual inflation adjustment based on “Chained” Consumer Price Index (C-CPI) data, which has taken the place of the more traditional price index that was used prior to the new tax reform law of December 2017. See page 400 of the Internal Revenue Bulletin No. 2018-10 issued on March 5, 2018.

Employers should inform participants and make the necessary changes to their policy and benefit documents. Also, any 2018 contributions in excess of the new limit must be refunded. Below is an updated table containing various account contribution limits and high deductible health plan (HDHP) minimum deductibles and maximum out-of-pocket amounts for calendar year 2018.

February 21, 2018
Proposed Rules Expanding Access to STLDI Plans
On February 2018, acting on the Executive Order of October 2017, various federal departments issued proposed rules that would extend the period of time a person could be on a short-term limited duration insurance (STLDI) plan. STLDI plans are exempt from most of the Affordable Care Act’s (ACA) requirements. Depending on the final rules, covered individuals could be able to stay on STLDI plans for longer than 12 months with the issuers consent.

STLDI plans, also referred to as “skinny plans”, often have lower premiums than ACA-compliant plans because they are not as comprehensive and intended to fills temporary gaps in coverage while a person is transitioning from one ACA-compliant plan to another. STLDI are unlikely to include the elements of ACA-compliant plans, including pre-existing condition exclusion prohibition, coverage of essential health benefits without annual or lifetime dollar limits and preventative care coverage.

See the proposed rule here.

February 9, 2018
New Budget Deal Has Provisions That Impact Health Care Reform
On February 9, 2018, President Trump signed a bipartisan budget deal into law. The deal includes a temporary funding resolution (the fifth one this fiscal year) that extends funding of federal operations through March 23. Now that a budget has been authorized, lawmakers will continue to work towards finalizing funding bills.

The new budget contains several provisions impacting health care reform and the Affordable Care Act (ACA). Amongst other changes, the bill:

  • Eliminates the Independent Payment Advisory Board (established under the ACA to recommend Medicare savings).
  • Reduces funding for the Prevention and Public Health Fund (established under the ACA with the goal of supporting federal public health programs).
  • Delays cuts to Medicaid Disproportionate Share Hospital (DSH) payments. (Medicaid DSH payments are given to hospitals that serve a disproportionate number of low-income patients.)
  • Extends funding for the Children’s Health Insurance Program (CHIP) for an additional four years.
  • Authorizes funding for community health centers, the Maternal Infant and Early Childhood Home Visiting Program and the National Health Service Corps.

February 9, 2018
Trump Administration Calls for Drug Pricing Reforms to Medicare, Medicaid and FDA
On February 9, 2018, the President’s Council of Economic Advisors (CEA) released their report, “Reforming Biopharmaceutical Pricing at Home and Abroad,” in which they make various recommendations on ways to lower drug prices. One of these recommendations is to make changes to the Medicare and Medicaid systems for pricing drugs. They state that in the current system steep drug discounts provided to Medicare and Medicaid recipients cause drug makers to artificially inflate their drug prices for all other consumers. It is now up to Congress regarding how they will respond to this and other recommendations contained in the report.

January 22, 2018
CHIP Gets Funding and Health Care Taxes are Delayed
The continuing resolution passed in Congress on January 22, 2018 to fund the government through February 8 includes 6 years of funding for the Children’s Health Insurance Program (CHIP).It also implements delays to taxes imposed by the Affordable Care Act (ACA), as follows:

  • The Cadillac tax, a 40% tax on high-cost employer insurance, has been delayed for two years, until 2022.
  • The health insurance tax (HIT) on health insurance providers has been suspended for calendar year 2019. This does not affect the payment of the fee for 2018.
  • The medical device tax, which was set to go into effect on January 1, 2018, has been delayed for two years, until 2020.

The HIT (formally called the Health Insurance Providers Fee) was designed to help fund the federal and state marketplace exchanges. The fee has been collected from health insurance providers since 2014, and was suspended for the 2017 calendar year. It went back into effect for 2018 and has now been suspended for 2019. According to various federal departments and congressional committees, the HIT would be passed through to consumers in the form of higher premiums.

The delays to the health insurance and medical device taxes amount to tax cuts that are not offset by cuts in spending or increases in other taxes. As such, the budget deficit is likely to increase more than what was projected at the time the tax bill (the Tax Cuts and Jobs Act of 2017) was passed last December.

The continuing resolution allows for the government to keep running while Congress continues to work on reaching a full appropriations act for the current fiscal year, which runs from October 1, 2017 through September 30, 2018. There have already been a number of continuing resolutions implemented to continue funding the government since the beginning of the fiscal year.

December 22, 2017
Extension of Due Date for Furnishing 2017 Forms 1095 B and C to Employees
The Department of the Treasury and the Internal Revenue Service is providing an automatic extension to employers, insurers and other providers of minimum essential coverage to furnish the 2017 Forms 1095-B and 1095-C to individuals. A 30-day extension is being provided, from January 31, 2018 to March 2, 2018.

Because of the extension, some individual taxpayers may not receive Form 1095-B or Form 1095-C by the time they are ready to file their tax return. Taxpayers may rely on other information received from their employer or other coverage provider for purposes of filing their returns. They do not need to wait to receive the Forms before filing their returns, and they will not be required to amend their income tax returns once they receive their forms.

The government has determined there is no similar need to provide an extension to file forms 1094-B, 1095-B, 1094-C and 1095-C with the IRS. Therefore, the original filing due date to the IRS remains February 28, 2018, if not filing electronically, or April 2, 2018, if filing electronically. However, an automatic extension of the filing date is available as long as the filing entity files Form 8809 in a timely fashion.

For more information regarding this extension, please read IRS Notice 2018-06.

December 22, 2017
How the New Tax Law Affects Employee Benefit Programs
Here’s how the Tax Cuts and Jobs Act signed by the President into law on December 22, 2017 will affect commuter benefit and paid family and medical leave tax deductions for employer-sponsored benefit programs effective January 1, 2018:

Changes to Commuter Benefits

Employers can no longer take a business deduction for any amounts set aside by employees, or provided by employers, related to tax-free qualified transportation plans offered to their employees.

In other words, until 2018, employers could offer a commuting benefit that was tax deductible to the employer—up to $255 a month for transit and $255 for parking in 2017. Since employers will no longer be able to deduct these expenses from their tax bill, there is some concern that employers may pull back from offering a commuter plan to their employees. On the other hand, there is also hope that employers will continue to offer commuter benefit programs or subsidize commuting costs for their employees, since the deduction loss will be mitigated by the corporate tax rate dropping from 35% to 21%.

Employees will still be able to use pretax income to pay for commuter benefits using an employer-sponsored commuter program. According to the Joint Committee on Taxation, the federal government will receive about $17.7 billion with the removal of employer deductions for commuter benefits.

Employers who offer commuter programs to their employees in 2018 will not be able to claim a tax deduction at the end of the year for such benefits. Employers can choose to remove the offering from their benefit programs.

Bicycle commuting benefits will no longer be tax-free for employees, beginning in 2018 through 2025. However, bicycle commuting reimbursements will be tax deductible to the employer.

Employer Credit for Paid Family and Medical Leave

The new tax law includes a section (Section 45S) that provides a credit employers may be eligible to claim for wages paid to employees who are on family and medical leave (FMLA). The employer credit has various limitations, including the following:

(1) As of now, the credit is in place for only 2018 and 2019.

(2) The credit only applies to employees earning less than $72,000 a year.

(3) Employees must be employed for a year.

(4) In order to be eligible, the employer must have a written policy providing that full-time employees are eligible for a minimum of two weeks’ paid leave, and part time employees must be eligible for a commensurate amount of leave on a pro rata basis.

(5) The rate of pay during the leave cannot be less than 50% of the employee’s normal wages. Any benefits that are mandated under state or local law cannot be taken into account for purposes of determining the amount paid.

If available, the credit is equal to a percentage of the wages paid to a qualifying employee during an FMLA period. Employers can claim a credit for up to 12 weeks of paid FMLA leave per employee per year. The percentage starts at 12.5% and increases by 0.25% (to a maximum of 25%) for each percentage point by which wages paid during the leave exceed 50% of the wages normally paid to the employee.

To date, there is limited guidance on the credit and we will share official guidance as soon as it becomes available.

 

*This information is neither intended nor implied to be legal or regulatory advice or counsel. The information on this site is provided for general informational purposes only and represents a summary based on publicly available sources. We make no representations about and assume no responsibility for the accuracy or completeness of information contained in this document and such information is subject to change without notice.  Sources are available upon request.

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