December 30, 2019

HRB 149 - 1) Circuit Court Ruling on ACA; and 2) Repeal and Extension of Certain ACA Taxes (article)

HRB 149 - 1) Circuit Court Ruling on ACA; and 2) Repeal and Extension of Certain ACA Taxes
Issued December 26, 2019 I Dowbload as a PDF

Fifth Circuit Court Ruling on ACA

On December 18th, the Fifth Circuit Court of Appeals issued its opinion in the on-going Texas v. U.S. litigation stating that the individual mandate is invalid in that its validity depended on the imposition of a tax for failure to maintain coverage. When Congress reduced this tax to zero, the validity of the individual mandate was lost, according to this Court. What the Court did not decide is whether the entirety of the Affordable Care Act (ACA) must fall due to the invalidation of the individual mandate. Rather, the Court is returning the matter to the lower court from which it came for further consideration.

What this means, in practical terms, is, at least at this moment, all aspects of the ACA, other than the individual mandate and certain ACA taxes (see article below), remain in full force and effect while the matter continues to be considered by the courts.

Stay tuned for further developments. General thought is that the lower court will take its time to review matters and any decision may not be rendered until after the 2020 election. It is also possible that other actions could be taken. In the meantime, keep moving forward with ACA compliance.


Repeal and Extension of Certain ACA Taxes

A broad sweeping government appropriations bill (Further Consolidated Appropriations Act, 2020, Pub. L. No. 116-94) was signed into law on December 20, 2019. 


Of particular note, this law repeals three highly unpopular ACA taxes including:

  1. The so-called Cadillac tax on high cost employer sponsored health insurance exceeding certain threshold limits, which was scheduled to take effect in 2022, is repealed; 
  2. The annual fee imposed on covered entities (insurers) who engaged in providing health insurance for U.S. health risks is repealed, effective in 2021, i.e., the tax imposed for 2020 will continue to apply; and
  3. The 2.3% excise tax imposed on manufacturers and importers for sales of certain medical devices.

The Appropriations Act also includes a provision that extends the Patient-Centered Outcomes Research Institute (PCORI) fee for ten years. The PCORI fee was set to expire for policy/plan years ending on or after October 1, 2019 but the fee will now continue to be assessed through 2029.

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.

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