Lost in much of the drama of this weekend’s government shutdown and the inclusion of the Children’s Health Insurance Program (CHIP) funding extension in the continuing resolution (CR) that finally passed, was that the CR also addressed a few of the more onerous aspects of the Affordable Care Act (ACA). Here is a quick rundown:

ACA Tax UpdateThe ACA’s Cadillac Tax implementation was pushed back even further to January 1st, 2022. You’ll recall that this 40% excise tax on higher-cost employer medical plans was originally set to go into effect in 2018 and was then moved to 2020 back in 2015. While this latest delay doesn’t kill the tax, the constant kicking of this can down the road certainly gives its opponents hope that it will never actually see the light of day.

The ACA’s Medical Device Tax has been delayed 2 years to 2020. This 2.3% tax on medical devices was included in the ACA legislation to offset some of its costly insurance subsidies, much like the Cadillac Tax.

The Health Insurance Tax (HIT) will be suspended for all of 2019. It will be collected in 2018 and then presumably again in 2020, unless another suspension or other Congressional act occurs. The HIT is essentially a health insurance excise tax which was included in the original ACA legislation and took effect this month.

What this means to employers: in the short-term, not much. Your health insurance premiums likely already reflect the 2018 HIT and the other two taxes have not taken effect yet, so their delay will not have any immediate financial impact on your company.

In the medium-term, this is a win for employers, as the HIT will go away for at least a year, resulting in temporarily lower 2019 renewals. Further, any employer with generous benefits won’t have the Cadillac Tax looming over their heads for at least four more years.

If the HIT is reinstated in 2020, fully-insured groups will see a big 2020 rate increase. Self-funding with stop-loss would avoid this unknown. It is also worth noting that these delays and suspensions, combined with the recent tax bill’s repeal of the ACA’s individual mandate, significantly reduce the ACA’s funding mechanism. We will be watching these issues closely and will be issuing further employer alerts as the ACA picture gains a bit more clarity.

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Steven Keshner

Steven Keshner

Partner and Chief Actuary at Spring Consulting Group, LLC
Steven Keshner, FSA, MAAA is a Partner and Chief Actuary for Spring Consulting Group. Steven has over 25 years of actuarial, financial, underwriting and strategic insurance experience with a group, life, health and retirement focus. Steven’s experience allows him to be qualified as an Appointed Actuary enabling him to sign off on employer, insurer and captive insurer reserves as well as actuarial feasibility studies and other actuarial certifications. Steven has worked with clients to develop DOL and product initiatives focused on improving rate competitiveness through medical plan designs, product language, consumer driven health plans, and value added benefits such as low cost, minimally underwritten LTD plans. Steven’s ability to gain cost efficiencies led him to design a new underwriting and pricing model for life and disability captive programs. Prior to joining Spring, Steven was CFO and Chief Actuary of Nippon Life Benefits, a subsidiary of Nippon Life Insurance Company, a global mutual life insurer.
Steven Keshner

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