Cadillac Tax May Finally Be Running Out of Gas

The Cadillac tax - a 40 percent tax on the most generous employer-provided health insurance plans - may be about to change. The Cadillac tax was supposed to take effect in 2018 but has been delayed twice and recently, the House voted to repeal this tax entirely. Read this blog post to learn more about this potential change.


The politics of healthcare are changing. And one of the most controversial parts of the Affordable Care Act — the so-called Cadillac tax — may be about to change with it.

The Cadillac tax is a 40% tax on the most generous employer-provided health insurance plans — those that cost more than $11,200 for an individual policy or $30,150 for family coverage. It was supposed to take effect in 2018, but Congress has delayed it twice. And the House recently voted overwhelmingly — 419-6 — to repeal it entirely. A Senate companion bill has 61 co-sponsors — more than enough to ensure passage.

The tax was always an unpopular and controversial part of the 2010 health law because the expectation was that employers would cut benefits to avoid paying the tax. But ACA backers said it was necessary to help pay for the law’s nearly $1 trillion cost and help stem the use of what was seen as potentially unnecessary care. In the ensuing years, however, public opinion has shifted decisively, as premiums and out-of-pocket costs have soared. Now the biggest health issue is not how much the nation is spending on healthcare, but how much individuals are.

“Voters deeply care about healthcare still,” said Heather Meade, a spokeswoman for the Alliance to Fight the 40, a coalition of business, labor and patient advocacy groups urging repeal of the Cadillac tax. “But it is about their own personal cost and their ability to afford healthcare.”

Stan Dorn, a senior fellow at Families USA, recently wrote in the journal Health Affairs that the backers of the ACA thought the tax was necessary to sell the law to people concerned about its price tag and to cut back on overly generous benefits that could drive up health costs. But transitions in healthcare, such as the increasing use of high-deductible plans, make that argument less compelling, he said.

“Nowadays, few observers would argue that [employer-sponsored insurance] gives most workers and their families’ excessive coverage,” he wrote.

The possibility of the tax has been “casting a statutory shadow over 180 million Americans’ health plans, which we know, from HR administrators and employee reps in real life, has added pressure to shift coverage into higher-deductible plans, which falls on the backs of working Americans,” said Rep. Joe Courtney (D-Conn.).

Support or opposition to the Cadillac tax has never broken down cleanly along party lines. For example, economists from across the ideological spectrum supported its inclusion in the ACA, and many continue to endorse it.

“If people have insurance that pays for too much, they don’t have enough skin in the game. They may be too quick to seek professional medical care. They may too easily accede when physicians recommend superfluous tests and treatments,” wrote N. Gregory Mankiw, an economics adviser in the George W. Bush administration, and Lawrence Summers, an economic aide to President Barack Obama, in a 2015 column. “Such behavior can drive national health spending beyond what is necessary and desirable.”

At the same time, however, the tax has been bitterly opposed by organized labor, a key constituency for Democrats. “Many unions have been unable to bargain for higher wages, but they have been taking more generous health benefits instead for years,” said Robert Blendon, a professor at the Harvard T.H. Chan School of Public Health who studies health and public opinion.

Now, unions say, those benefits are disappearing, with premiums, deductibles and other cost sharing rising as employers scramble to stay under the threshold for the impending tax. “Employers are using the tax as justification to shift more costs to employees, raising costs for workers and their families,” said a letter to members of Congress from the Service Employees International Union.

Deductibles have been rising for a number of reasons, the possibility of the tax among them. According to a 2018 survey by the federal government’s National Center for Health Statistics, nearly half of Americans under age 65 (47%) had high-deductible health plans. Those are plans that have deductibles of at least $1,350 for individual coverage or $2,700 for family coverage.

It’s not yet clear if the Senate will take up the House-passed bill, or one like it.

The senators leading the charge in that chamber — Mike Rounds (R-S.D.) and Martin Heinrich (D-N.M.) — have already written to Senate Majority Leader Mitch McConnell to urge him to bring the bill to the floor following the House’s overwhelming vote.

“At a time when healthcare expenses continue to go up, and Congress remains divided on many issues, the repeal of the Cadillac tax is something that has true bipartisan support,” the letter said.

Still, there is opposition. A letter to the Senate on July 29 from economists and other health experts argued that the tax “will help curtail the growth of private health insurance premiums by encouraging employers to limit the costs of plans to the tax-free amount.” The letter also pointed out that repealing the tax “would add directly to the federal budget deficit, an estimated $197 billion over the next decade, according to the Joint Committee on Taxation.”

Still, if McConnell does bring the bill up, there is little doubt it would pass, despite support for the tax from economists and budget watchdogs.

“When employers and employees agree in lockstep that they hate it, there are not enough economists out there to outvote them,” said former Senate GOP aide Rodney Whitlock, now a healthcare consultant.

Harvard professor Blendon agrees. “Voters are saying, ‘We want you to lower our health costs,’” he said. The Cadillac tax, at least for those affected by it, would do the opposite.

SOURCE: Rovner, J. ( 19 August, 2019) "Cadillac tax may finally be running out of gas" (Web Blog Post). Retrieved from https://www.employeebenefitadviser.com/articles/obamacare-excise-tax-may-be-at-an-end


The ACA’s uncertain lifespan following the Cadillac Tax delay

Are you questioning how the ACA will continue with the delay of the Cadillac Tax? Neil Model gives a breakdown of the "what-ifs" scenarios.

Original Post from BenefitsPro.com on July 26, 2016.

Since the delay of the Affordable Care Act’s (ACA) “Cadillac Tax” provision, which was passed on December 18, 2015, some may be wondering how the ACA will be funded until 2020. I do not believe we have been given the answer.

The Cadillac Tax was to be imposed as a means of funding the ACA by penalizing employers for offering high-cost employer sponsored health insurance plans to employees. One must take into consideration that with continued double-digit healthcare premium increases, the so-called “high cost” plans are not so far-fetched for many more employer sponsored plans in the future. The Cadillac tax was also to double as an incentive for plan sponsors to look at less expensive plan alternatives by the time the tax would be imposed, which is now 2020.

The tax, were it not delayed, would have assessed a penalty of 40 percent for plans costing an employee more than $10,200 annually, and family plans costing an employee $27,500 annually. I have little doubt that the craftsman of the ACA actuarially assumed there would be more employers subject to penalties in future years, despite most efforts to curb premiums.

But because the tax has been delayed, questions about how the ACA will be funded until 2020 have arisen. While still some plan sponsors speculate about whether the ACA will ultimately be repealed, others are still preparing for 2020 by attempting to provide affordable plan options for their employees. This is and will become increasingly more difficult due to spiraling health care costs and corresponding premiums. I have heard it asked many times: “How much more can I impose on my employees?” Add to that concern the even greater Rx inflation due to new and very expensive drugs coming to market for Hepatitis C, rheumatoid arthritis and cholesterol.

Here are some of the important things to be aware of regarding changes to the Affordable Care Act in 2016....

Though there have been no definitive plans announced to supplement the funding that would have resulted from the Cadillac Tax, other taxes and fees have been responsible for the partial funding of health care reform, some paid by individuals, others paid by employers, including numerous taxes on medical device manufacturers, indoor tanning services, charitable hospitals that fail to comply with Obamacare requirements, brand name drugs and health insurers. Other fundraising for the ACA comes through the elimination of tax deductions for certain drug coverage and tax increases for those with a certain income threshold.

Since the ACA’s emergence, we have read about failed state exchanges, bankrupt cooperatives, and the significant losses the major insurance carriers have incurred participating in the federal exchanges. We have also seen the failure of the government to pay the subsidies to insurance carriers in the timely fashion promised and expected. With the various delays and elimination of ACA funding clauses, we all must wonder where the money to pay for ACA will ultimately come from. Does everyone have a mirror?

According to an article by Reuters with information from the Congressional Budget Office, U.S. taxpayers will ultimately be responsible for $660 billion this year alone as a subsidy to those receiving health insurance under the age of 65. Those figures are expected to rise to $1.1 trillion over the next decade.

The burden will not only fall on the backs of the consumer, but on employers that want to help lift the burden of the high cost of health care. And, providing major medical insurance might not be enough in today’s environment. Ultimately, it will come down to employers educating themselves on the most effective strategies and seeking the guidance from benefits brokers to come up with creative, alternative solutions that will make it easier for employees to live healthy lives.

As the lifespan of the ACA remains undetermined, employers need to educate and prepare as best as possible. Uncertainty, especially with the election around the corner, will be a key theme the rest of this year, particularly in the health care realm.

So, the question remains: Will the ACA keep fighting the good fight going forward, or will it crumble under pressure?


ACA Puts Employers Between A Rock And A Hard Place

A great article by Greta Engle on the upcoming challenges with the ACA.

Original Post from SHRM.org on July 8, 2016

The value of employer-sponsored health care recently has come under scrutiny from lawmakers as they look for solutions to reduce the federal deficit and alternatives to the Affordable Care Act (ACA). If you’re not a political junkie like me, let me provide some context.

Historically, one of the largest subsidies for health insurance comes from employment-based coverage. That’s because the federal tax system provides preferential treatment for health care coverage that people receive from their employers. Employers’ payments for health coverage are excluded from income and payroll taxes. And, most times, employee contributions are also excluded from income and payroll taxes.

There are many benefits of employer-sponsored health care coverage that Congress and specifically House Speaker Paul Ryan, who has commissioned a Task Force on Health Care Reform, should realize. For starters, the ability to offer health benefits sets an employer apart and can be a strong driver in a retention or recruitment strategy. American workers in today’s climate have an expectation of health care as part of their compensation package (remember the good old days when you were considered to have a professional job if your employer provided health benefits?) and employer-sponsored health benefits costs are pretax deductions. Additionally, flexible spending accounts (FSAs) and health savings accounts (HSAs) provide another savings tool for employees to avoid out-of-pocket expenditures coming from a household budget. These are just a few of the benefits.

While the ACA includes some provisions that should be applauded, as they’ve increased access and coverage, there are some provisions that have had an adverse effect—especially on employers. We’re now beginning to realize the costs associated with the ACA, and, in particular, how our economy has been impacted. Some Americans are now working part time or having their hours cut by employers seeking to avoid providing coverage under the full-time mandate of a 30-hour workweek. Then there’s my favorite topic: the excise tax, or “Cadillac tax,” that was delayed until January 2020. To avoid the anticipated tax, many employers have restructured their health benefits offerings or increased workers' deductibles and co-pays.

When the excise tax goes into effect in 2020, employers will most certainly experience higher deductibles and increased out-of-pocket costs—resulting in employers dropping group health plan coverage. This tax MUST be repealed; at the very least, significant changes must be made to avoid those financial consequences to employees. Some of those changes include eliminating HSAs and FSAs from the calculation; removing the employee portion of premium contributions; and basing inflation on the national health care inflation trend rather than the Consumer Price Index, which was 1.5 percent for 2013.

Tinkering with the tax treatment of employer-sponsored health care is not a great idea, especially since more than 175 million Americans currently enjoy this benefit. Instead of targeting employer-sponsored health benefits, lawmakers should consider other financial options.

Employers and employees should be paying attention to this critical issue. The Task Force on Health Care Reform is on the fringes of recommending some tax implications that can shatter a business, threaten individuals’ financial stability and jobs across the U.S., and put employers between a rock and a hard place!

Originally posted on the SHRM Policy Action Center Blog.

Source:

Engle, G. (2016, July 8). ACA puts employers between a rock and a hard place [Web log post]. Retrieved from http://blog.shrm.org/blog/aca-puts-employers-between-a-rock-and-a-hard-place


The Cadillac Tax: Myths & Facts

Original post benefitspro.com

Americans love a good story. From fairy tales to hair-raising films that leave us cowering in our seats, we enjoy when our hearts pound in anticipation. Sometimes, though, we keep ourselves up at night by creating myths about things that shouldn't be worrisome at all. One example: The Affordable Care Act's 40 percent excise tax on high-cost health care plans, commonly referred to as the Cadillac Tax.

Although we are several years away from its implementation, brokers are wondering what these health care changes will mean for their business. The Cadillac Tax is confusing and prompts questions from employers and benefits professionals — especially about when to make changes to benefits plans and whether voluntary insurance is affected.

Let's take some time to distinguish between the myths and facts so when you communicate with your clients about their plans this year — and in years to come — you have the facts to ensure you’re providing clients with accurate information to make effective business decisions regarding benefit offerings.

 

Myth: Employers should make benefit changes now to avoid the Cadillac tax.
Fact: The Cadillac tax has been delayed until 2020.

  • As part of the Congressional spending bill signed into law in late December 2015, the Cadillac Tax is delayed until 2020.
  • Considering implementation of the tax is several years away and regulations will evolve, employers can wait before considering changes to their policies.

 

Myth: All voluntary benefits are included in the tax.
Fact: Generally, voluntary insurance products do not count toward the Cadillac Tax calculation.

  • Only two types of voluntary coverage — specified disease and hospital indemnity — are subject to the calculation of the tax, but only if they’re paid for with pretax dollars, such as through a cafeteria plan, or with excludable employer contributions. Otherwise, they are not subject to the calculation of the tax.
  • Voluntary insurance products are defined as HIPAA-excepted benefits.

 

Myth: Employers should switch their pretax voluntary insurance products to after-tax versions.
Fact: Only employers with benefits plans considered “high cost” need to consider after-tax strategies.

  • Employers and their workers receive tax advantages for retaining pretax voluntary products.
  • Only two types of voluntary coverage — specified disease and hospital indemnity — are included in tax calculations, and only then if they’re paid with pretax dollars or the employer pays any portion of the premium. Other voluntary insurance benefits won't trigger the Cadillac Tax, regardless of whether they’re offered before or after tax.

 

Myth: Employers or workers will be responsible for paying the Cadillac Tax when it goes into effect.
Fact: In most cases, the insurance provider will be responsible for paying the tax.

  • Most small businesses are fully insured, meaning the insurance provider sets the premium and pays the claims. When that's the case, the insurer, not the employer, is responsible for paying the Cadillac Tax when it goes into effect in 2020.
  • If an employer is self-insured, meaning the employer sets the premiums and pays the claims, or the coverage offered is a health savings account (HSA) or an Archer medical savings account (MSA), the employer or the plan administrator will be responsible for paying the tax.

The bottom line is that myths and rumors have made the Cadillac Tax seem more confusing than it already is. It isn't even expected to take effect for another four years, so it shouldn't prompt your clients to exclude voluntary insurance from their benefits options. After all, the security voluntary coverage provides can help ensure your clients and their employees sleep well instead of worrying about medical costs that are continuing to rise.


Despite delay, employers adopt ‘Cadillac Tax’ strategies

Original post by John Scorza, shrm.org

Hope for the best, but prepare for the worst, may be the best advice for employers when it comes to the uncertain future of the “Cadillac tax.”

The Affordable Care Act’s (ACA’s) 40 percent excise tax is now slated to be levied on costly employer-sponsored health insurance coverage beginning in 2020. The plans subject to the tax are those with benefits valued above $10,200 for single coverage and $27,500 for family (other than self-only) coverage, indexed annually for inflation.

The levy—popularly known as the “Cadillac tax”—has employers on edge, with many acting to reduce their risk of exposure while keeping an eye on repeal efforts. A brief repreive was provided by the Consolidated Appropriations of 2016, enacted in December 2015.

As regards the Cadillac tax, the omnibus measure:

  • Delayed the effective date by two years, from 2018 to 2020.
  • Made the excise tax deductible by businesses.

“The two-year delay gives Congress more time to devise a longer-term solution to the excise tax, including potentially amendment or repeal,” commented Kathryn Bakich, J.D., national health care compliance practice leader at Segal Consulting in Washington, D.C.

Even with this delay, it's wise for employers not to bank on its ultimate repeal, as noted below, and to use any expanded breathing room to consider steps to avoid the tax's grasp—or just to keep health benefit spending under control.

Restraining Spending & Raising Revenue

The excise tax was designed to accomplish two primary goals:

  • Lower overall spending on health care by making employer-sponsored health plans less comprehensive, and thereby fostering more cost-conscious spending decisions by employees.
  • Generate federal revenue to pay for other provisions of the ACA, including subsidies provided through federal and state health exchanges for low-to-moderate-income employees who lack affordable coverage through their employer.

The Cadillac tax is estimated to raise nearly $90 billion through 2025. Twenty-five percent of those funds will come directly from employers. The other 75 percent will be generated by taxes on higher employee wages that presumably would result from lower health care costs—although there’s no guarantee that companies will raise wages as health costs go down. “There’s evidence both for and against” that assumption, noted Paul Fronstin, director of the Employee Benefit Research Institute’s (EBRI’s) health research and education program, at a Dec. 10 EBRI policy forum in Washington, D.C.

Opposition to the tax is strong. The tax eventually will affect nearly all 175 million Americans with employer-sponsored health plans, said Katy Spangler, senior vice president of health policy at the American Benefits Council. That’s because the thresholds that trigger the tax are indexed to the consumer price index (CPI), but medical inflation rises much faster than the CPI. As a result, more and more plans will become subject to the tax, Spangler said. Additionally, the tax is forcing employers to shift costs to employees in the form of higher deductibles and co-pays, she said.

That’s the main tactic employers are using to prepare for the tax, according to Richard Stover, principal with Buck Consultants. He identified five possible employer strategies:

  • Shift costs. Many companies are doing this, at least as a component of their overall strategy, by imposing higher deductibles, reducing medical benefits, implementing high-deductible health plans combined with health savings accounts (HSAs) and offering voluntary benefits that help employees cover medical expenses. “Unfortunately, the primary way [to achieve significant cost-savings], the easiest way to do it, is to shift costs to employees,” Stover said.
  • Absorb the cost. This is not a viable long-term strategy because of the cost impact and the administrative burden that would result, Stover said. “No one wants to absorb the cost,” he remarked.
  • Improve plan efficiency. Employers can consider three broad approaches here, according to Stover. First, manage utilization through tactics such as onsite clinics, high-performance networks, and telehealth and transparency tools. Second, manage unit costs by using medical and prescription discounts and finding more effective vendors, for instance. Third, promote health through wellness and disease-management programs.
  • Eliminate ancillary health benefits. Options here include reducing or eliminating employer HSA contributions and limiting or eliminating employee pretax HSA contributions (see the SHRM Online article HSA Strategies to Avoid the Cadillac Tax).
  • End health plan sponsorship. Just as most employers are not willing to absorb the costs of the tax, most are not considering dropping their health plans, either. Organizations that terminate their plans will likely face significant recruiting and retention problems unless they provide employees with additional wages to purchase coverage on a public exchange. But even that is no panacea. “There’s really no tax-effective way to do that,” Stover said.

Regarding these five strategies, Stover stressed that “No one of these levers is enough. Employers are looking at combinations of these approaches that they could use to better manage the costs of their programs.”

Repeal Sought

Spangler at the American Benefits Council is optimistic that Congress will ultimately repeal the excise tax. The council is a member of the Alliance to Fight the 40, a coalition of nearly 90 organizations opposed to the levy.

Others have noted, however, that revenues lost due to repeal would need to be replaced with other income sources.

In the immediate future, President Barack Obama has pledged to veto any repeal measure. In any event, benefit advisors are telling employers not to leave themselves vulnerable to triggering the tax, if and when it should take effect.

John Scorza is associate editor of HR Magazine.


Congress vote delays Cadillac tax by 2 years

Original post by Shelby Livingston, businessinsurance.com

The $1.1 trillion budget deal that Congress approved Friday would delay the notoriously unpopular Cadillac tax for two years and put a repeal in reach of the congressional leaders and business groups who oppose it.

But benefits experts say delaying the excise tax until 2020 is unlikely to ease the aggressive strategies companies have put in place to avoid triggering it.

The House voted 316-113 Friday to approve the omnibus spending deal that congressional leaders unveiled earlier in the week. The Senate followed quickly with a 65-33 vote to approve the package and send it to President Barack Obama, who indicated he would not veto the measure.

Opponents of the 40% excise tax, which would be imposed on the portion of group health plan premiums that exceed $10,200 for single coverage and $27,500 for family coverage under the Patient Protection and Affordable Care Act, say the two-year delay is a major win for employers.

“The ACA relief is welcome and appreciated,” the National Retail Federation said in a statement.

The delay is “the first step toward full repeal,” the Alliance to Fight the 40, a lobbying group opposed to the tax, said in a statement.

For Victoria Nolan, risk and benefits manager for Hillsboro, Oregon-based Clean Water Services, a water resources management utility, the delay would “provide more breathing room to look at what additional things can be done to keep under the Cadillac tax in the future.”

Others say postponing the excise tax signals a repeal is on the way.

“We see the two-year delay as a down payment on a full repeal,” said Katy Spangler, senior vice president of health policy at the Washington-based American Benefits Council, which has backed repealing the tax on behalf of the hundreds of large employers it represents.

“If we keep the pressure on Congress, the delay may help us move toward” a repeal, American Benefits Council President James Klein said.

Geoffrey Manville, principal of government relations at Mercer L.L.C. in Washington, said the congressional vote “really increases the odds that this tax will not go into effect,” but he added the final decision would come down to “the next Congress and the next president.”

The odds for a repeal are “better than even,” he said.

While delaying the tax gives employers more time to find ways to reduce their exposure, it's unlikely to halt much of the aggressive cost-management strategies employers have already set in motion to avoid triggering the tax, sources said.

“The majority of employers will continue down that road like they have been before the excise tax — whether or not it's delayed or repealed,” said Steve Wojcik, vice president of public policy with Washington-based National Business Group on Health, of many employers' shift to high-deductible health plans. “As long as overall spending for health care continues to climb faster than general inflation, there's going to be this pressure.”

Seventy-two percent of employers expect at least one of their benefit plans to hit the excise tax in 2020 if they don't control costs, according to an NBGH survey in August. Mr. Wojcik said that number could potentially be reduced with the delay.

Delaying the tax also does nothing to fix ongoing cost increases squeezing employers' benefits plans, prompting them to shift more costs to workers, sources said.

Employers saw group health plan costs rise 3.8% in 2015 to an average $11,635 per employee, according to Mercer.

Supporters of the excise tax see it as a way to slow U.S. heath care spending, which the U.S. Centers for Medicare and Medicaid Services said topped $3 trillion in 2014.

According to the bipartisan nonprofit Committee for a Responsible Federal Budget, delaying the Cadillac tax until 2020 would cost the government $16 billion. Repealing it would cost $91.1 billion over the next 10 years, the committee said last week.

In addition to the two-year delay Congress passed Friday, the omnibus budget bill also calls for a study by the U.S. comptroller general and the National Association of Insurance Commissioners of whether the ACA uses “suitable” benchmarks to determine if the tax should be adjusted to reflect age and gender factors in setting the excise tax thresholds.

Still, the delay means Clean Water Services has more time before it might need to reduce the amount workers are allowed to contribute to their flexible spending accounts, a strategy the company is considering because pretax contributions to FSAs — as well as health savings accounts and health reimbursement arrangements — would be included in the excise tax calculation, Ms. Nolan said.

But a full repeal of the Cadillac tax would eliminate the company's need to reduce the FSA limit on contributions altogether, she said.


Senate approves bill repealing ACA's Cadillac tax

It's unlikely to make it passed President Obama's desk, but Thursday evening the Senate passed legislation repealing key provisions of the Affordable Care Act.

The Senate passed the health care reform law-related provisions in the broader budget reconciliation bill - H.R. 3762. The bill passed the House of Representatives in October, and is excpected to accept the Senate measure.

Provisions, as laid out by BusinessInsurance.com, include:

• Repeal of the 40% excise tax, set to begin in 2018, on the portion of group health care plan premiums that exceed $10,200 f. or single coverage and $27,500 for family coverage. That provision was added, on a 90-10 vote, to the broader bill, and replaces an earlier version that would have only ended the tax through 2025. The Senate vote “is another strong bipartisan recognition that this tax must be repealed to preserve employer-sponsored health coverage,” James Klein, president of the American Benefits Council in Washington, said in a statement.

• Elimination of the $2,000-per-employee penalty employers face if they do not offer coverage to at least 70% of their full-time employees in 2015 and to 95% in 2016 and succeeding years.

• Elimination of the $3,000 penalty for each employee who is eligible for a federal premium subsidy and uses it to purchase coverage in a public health insurance exchange. That penalty is triggered if the portion of the premium an employer charges for single coverage exceeds 9.5% of an employee's household income and the employee is eligible for and uses a federal premium subsidy to purchase coverage in a public exchange.

• Elimination of the 2.3% federal excise tax imposed on manufacturers of medical devices.

RELATED:  5 signs the Cadillac tax may be repealed

The White House has said President Obama plans to veto the measure. And with the legislation narrowly passing the Senate, there's not expected to be enough votes to overturn a presidential veto.

However, some of the health care law repeal provisions could be included in so-called "must pass" legislation to extend expiring tax code provisions. Observers say such a bill could emerge next week.


The 3 biggest ACA requirements you still have to worry about

Original post hrmorning.com

Congratulations … you’ve survived the vast majority of the Affordable Care Act’s (ACA) requirements. But your compliance headaches aren’t over yet. What Obamacare regulations are still slated to kick in?

No. 1: Reporting requirements

When: Feb. 29, 2016 (March 31 if filing electronically). The deadline for future year’s returns will be Feb. 28.

What: This is what’s taking up the majority of employers’ attention right now. The ACA’s reporting requirements kick in for the first time in 2016. These are the requirements that make the government’s enforcement of the employer mandate possible.

The information that must be reported will allow the IRS to determine whether “large employers” are meeting the ACA’s requirements to offer full-time workers with adequate, company-sponsored health insurance — and, thus, whether those employers should be hit with shared responsibility penalties.

The requirements are complicated (here’s our plain-English breakdown), and employers haven’t had a lot of time to mull them over, so it’s understandable that they’ve taken companies’ attention away from what else is coming down the road.

But it’s crucial that employers remember there are two more key ACA provisions still to come.

No. 2: The ‘Cadillac tax’

When: Jan. 1, 2018.

What: Beginning in 2018, employer sponsored health plans — whether self-insured or not — will be subject to a 40% excise tax on the “value” (translation: premiums) of any healthcare coverage that exceed $10,200 for single coverage or $27,000 for family coverage.

Those figures will be adjusted for inflation. But as most of you know, the speed at which healthcare costs are increasing in this country far exceeds the rate of inflation. As a result, it’s expected to only be a few short years before even average healthcare plans are slapped with this so-called “Cadillac tax“.

As a result, there’s a huge push from certain parts of Congress, and even from business groups, to repeal the tax.

Will those efforts succeed? Right now, it’s anyone’s guess.

One prediction: If the tax does get repealed, it likely won’t be until much closer to its implementation. Why? There are two factors at play:

  1. The old kick-the-can-down-the-road-mentality on Capitol Hill, and
  2. The upcoming presidential election.

For starters, the implementation is still a couple of years away, so it may not be early enough for lawmakers to feel like their feet are being held to the fire to act. Also, the tax hasn’t really entered the public eye, yet, so most voters don’t know how it’ll affect them. As a result, election officials don’t feel compelled to act just yet.

On top of all that, the presidential election really complicates matters. Political candidates may not want to bring up the subject, fearing their stance on it may cost them votes or draw attention away from other, larger parts of their campaign platforms. That means the issue may not truly surface until after the next administration takes office in 2017.

No. 3: Nondiscrimination requirements

When: To be determined … still.

What: When the ACA first became law, the feds said it would subject group health plans to nondiscrimination rules similar to those that apply to self-insured group health plans. Under these ACA rules, any generous healthcare coverage offered to current or former executives — referred to as highly compensated employees — that isn’t available to the bulk of employees will trigger big penalties from the feds.

The problem is, the feds said the rules wouldn’t apply until official guidance had been released about them. So the feds have kept employers waiting and searching for the guidance. It was expected to finally be released in 2014, but it was delayed due to some lingering questions IRS officials had.

Federal agencies have informally suggested these nondiscrimination rules aren’t a top priority, so they still haven’t given any clues as to when the rules may be issued. Therefore, it appears they’re not imminent.

It’s possible this is another issue that may not be tackled until a new administration has taken office.

What employers did get, however, is a completely different set of nondiscrimination rules — in proposed, not finalized, form. They look to snuff out all forms of race, sex, color, national origin, age and/or disability discrimination in the health insurance marketplace.

While some of these forms of discrimination had already been banned under the PPACA, the new rules further clarify and strengthen protections for individuals. For example, the proposed rule establishes that the prohibition on sex discrimination includes discrimination based on gender identity. Discrimination on the basis of sexual orientation would also be barred.

These nondiscrimination rules aren’t expected to take effect until well into 2016, although not official date has been established.


5 signs the Cadillac tax may be repealed

Original post benefitspro.com

The Cadillac tax — a 40 percent excise tax on the health benefits companies provide their workers above a certain threshold — has certainly been one of the most interesting components of the Patient Protection and Affordable Care Act, despite the fact that it hasn't yet gone into effect.

The tax applies to benefits worth more than $10,200 for individuals and $27,500 for families beginning in 2018. Now, as 2018 nears and as employers take steps to avoid the tax, repeal cries become louder and the PPACA provision is under more scrutiny than ever before.

Here are five signs that the Cadillac tax may never be implemented.

1. Public opinion

The Cadillac tax has officially become the new PPACA provision that everyone loves to hate.

A survey out last month by Morning Consult found that 76 percent of Americans are concerned about the Cadillac tax, saying they’d like to see the provision be either repealed or delayed. Similarly, a poll from the Kaiser Family Foundation found a similar statistic. But that poll found that it’s easier to sway public opinion against the tax than to get them to support it.

After hearing positive effects of the tax — that it “could help lower health care costs” — opposition dropped to 55 percent. But after hearing negative facts, like how some people would need to pay more out of pocket, opposition rose to 75 percent.

2. Employer concern

This one is big: The Cadillac tax does not have the support from the people it most directly affects.

A mix of employers, business groups and labor unions all have spoken out against the tax, fighting for the PPACA provision to be killed. They argue that the Cadillac tax forces them to reduce benefits for workers and miss out on attracting and retaining good employees. While businesses don’t want to pay more taxes, unions worry that such a policy will discourage employers from negotiating generous health benefits for workers.

The National Association of Health Underwriters (NAHU), one of many industry groups opposing the tax, said repealing the tax would “protect employer-sponsored health coverage.”

3. Bipartisanship support of repeal

It wasn’t shocking that most Republicans weren’t in favor of PPACA’s excise tax. But it was a little shocking when key Democrats, including Sen. Chris Murphy of Connecticut, head of the Senate Patient Protection and Affordable Care Act Works campaign, also came out against it. Though PPACA has divided the parties, there appears to be bipartisanship against the law’s Cadillac tax. Bills from both parties have been introduced to repeal the tax.

Now, reports are surfacing that Senate and House minority leaders are working behind the scenes to plot the repeal of the unpopular excise tax — orchestrated by Democratic leaders.

Sen. Harry Reid (D-Nev.) and U.S. Rep. Nancy Pelosi (D-Calif.), plan to land the coupe de grace on the tax after the first of the year, according to Washington, D.C.-based news source The Hill.

The Hill reports the two leaders have been in discussions with the White House since spring over ways to repeal the tax and replace the revenue from it.

4. The 2016 presidential election

If killing the Cadillac tax doesn’t happen when Barack Obama is still in office, it may certainly happen after he’s out.

2016 presidential frontrunners have targeted the Cadillac tax — and not just the Republicans. Senator Bernie Sanders has opposed the tax since 2009, when he proposed an amendment to PPACA to remove it from the bill.

And, in late September, after saying she would examine her position on the Cadillac tax, Hillary Clinton came out against the Cadillac tax, calling for Congress to scrap it.

“I encourage Congress to repeal the so-called Cadillac tax,” she said in a statement. “My proposed reforms to our health care system would more than cover the cost of repealing the Cadillac tax, while also reining in skyrocketing prescription drug costs and out-of-pocket expenses for hard-working families. As president, I will continue to fight to make our health care system more value-driven and cost-efficient, and to drive down costs for patients and families.”

5. Threats to FSAs/HSAs

Not only does the tax threaten employer-sponsored health coverage, but it also threatens health savings and flexible spending accounts, money workers now sock away tax-free for medical expenses, analysis says.

Health care actuaries argue that FSAs may vanish in coming years as companies scramble to avoid the Cadillac tax. According to Kaiser Family Foundation, companies offering FSAs are far more likely to pay the Cadillac tax than those that don’t. Twenty-six percent of employers with FSAs will face the tax in 2018, Kaiser predicts, compared with just 16 percent of companies that don’t offer them.

Meanwhile, research by the American Bankers’ Association finds that nearly a quarter of existing health savings account plans would trigger the tax as it currently is written.

“We initially set out to prove that HSA plans would steer clear of the tax, but were dismayed to find some plans will be hit right away if payroll contributions are counted,” said Todd Berkley, president of HSA Consulting Services, the author of the study. “While many HSA plans will likely be a safe haven for now, like the AMT, this tax will eventually affect every plan in America, including HSA plans.”


ACA tweaks help small employers, but add confusion

Adjustments to the Affordable Care Act offer some relief for small employer compliance challenges. However, the proposed solutions may create more confusion.
No matter what lies on the horizon for the ACA, an industry expert said, employers and their advisors should not delay in preparing to comply with the law as it already exists.
A lack of resources is said to be causing some small to mid-size employers to lag behind in their understanding of ACA Compliance issues. The government is attempting to make some tweaks to the law to make it more feasible for small to mid-size employees.
For instance, under the Surface Transportation and Veterans Health Care Choice Improvement Act employers can exclude full-time employees who served in the U.S. military and who currently receive veterans' health insurance from the ACA's 50-or-more full-time employee threshold count. The veterans' coverage must either be through Tricare or through the Veterans Affairs Department.
The Protective Affordable Coverage for Employees Act (PACE) also offers some relief by redefining a small group employer from 1 to 50 employees to 1 to 10 employees. The PACE bill maintains the current definition of a small group market and gives states the flexibility to expand the group size.
The Cadillac Tax is also a concern for some employers. A lack of guidance, according to an industry expert, leaves employers and advisers wondering how to avoid the excise tax. The IRS has released proposals that offer some insight into Cadillac tax compliance.
Other concerns for employers and the ACA include a lack of guidance on nondiscrimination, automatic enrollment, quality of care reporting or a new SBC template. Employers have heard little in the way of gudiance from Washington on how to address these issues.