Issued on June 18, 2021, I Download as a PDF

Supreme Court Rules on Affordable Care Act

In a 7-2 decision issued on June 17, the U.S. Supreme Court upheld the Affordable Care Act (ACA). The multi-state lawsuit, California v. Texas, was the third challenge to the ACA to reach the Supreme Court.

A group of 20 states led by Texas, (“Plaintiffs”), alleged that because the ACA’s monetary penalty for failure to obtain minimum essential coverage was reduced to $0 in 2017, the minimum essential coverage provision was thereby unconstitutional. Plaintiffs sought the following:

• A finding that Plaintiffs had standing to file this lawsuit;
• A finding that the minimum essential coverage provision was unconstitutional;
• A finding that the minimum essential coverage provision was not severable from the rest of the ACA (thereby rendering the whole ACA unconstitutional); and
• An injunction against enforcement of the ACA.

A Texas federal district court agreed with the Plaintiffs as to points 1, 2, and 3. The 5th Circuit Court of Appeals agreed with the Plaintiffs as to points 1, and 2, but disagreed as to point 3. A group of 21 states led by California sought the Supreme Court’s review.

In their decision, the Supreme Court found that the Plaintiffs did not have standing to bring the lawsuit in the first place, “because they have not shown a past or future injury fairly traceable to” the enforcement of the minimum essential coverage mandate. As such, the ACA remains in place, in full force and effect.

It’s important to note that by finding that the Plaintiffs did not have standing to bring the lawsuit, the Court did not make any determination regarding the constitutionality of the minimum essential coverage mandate, or whether the mandate renders the entire ACA unconstitutional.

Annual PCORI Fee and Filing Reminder

Payment of the annual PCORI fee together with the Form 720 filing deadline is approaching. The PCORI fee is assessed on the average number of lives covered under the policy or plan. For policy and plan years ending between October 1, 2020 and December 31, 2020, the fee is $2.66 per covered life (for policy and plan years ending between January 1, 2020 and September 30, 2020, the fee is $2.54 per covered life).The fee is to be paid in connection with filing the IRS Form 720, Quarterly Federal Excise Tax Return. For plan years ending in 2020, the fee is to be paid by August 2, 2021.

As background, the PCORI fee is assessed on the average number of lives covered under the policy or plan.  Virtually, all health plans, whether insured or self-funded are subject to the PCORI fees .With regard to reimbursement type plans, health reimbursement arrangements (HRA) and medical flexible spending account (FSA) plans are subject to these fees. However, FSA plans that qualify as HIPAA-excepted plans are not subject to these fees. The PCORI fee does not apply to stand alone dental or vision plans. The IRS provides a chart for determining the applicability of the PCORI fee to types of insurance coverage or arrangements and whether such coverage or arrangement is subject to the fee, and the person or entity responsible for paying the fee.

The PCORI fees are assessed on the insurer of an insured plan.  For a self-funded plan, the plan sponsor is required to pay the fee on behalf of its plan. Because the law provides that the PCORI fees are to be paid by the plan sponsor, at least for plans subject to ERISA, the fees cannot be paid from plan assets.

Additional information about the PCORI fee is available on the IRS’ dedicated PCORI webpage and Questions and Answers.

About the Author

Karen R. McLeese is Vice President of Employee Benefit Regulatory Affairs for CBIZ Benefits & Insurance Services, Inc., a division of CBIZ, Inc.  She serves as in-house counsel, with particular emphasis on monitoring and interpreting state and federal employee benefits law. 

Ms. McLeese is based in the CBIZ Kansas City office.

The information contained herein is not intended to be legal, accounting, or other professional advice, nor are these comments directed to specific situations. The information contained herein is provided as general guidance and may be affected by changes in law or regulation. The information contained herein is not intended to replace or substitute for accounting or other professional advice. Attorneys or tax advisors must be consulted for assistance in specific situations. This information is provided as-is, with no warranties of any kind. CBIZ shall not be liable for any damages whatsoever in connection with its use and assumes no obligation to inform the reader of any changes in laws or other factors that could affect the information contained herein.