Government Shutdown & ACA Taxes Update
Government Shutdown & ACA Taxes Update
by Christoper E. Condeluci, Principal and sole shareholder of CC Law & Policy PLLC in Washington, D.C.
- As you know, the government shut down at 12:01 am Friday night/Saturday morning. BUT, as you probably also know, Congress is poised to re-open the government tomorrow. The Senate voted about an hour ago to fund the government through Feb. 8th. To secure Democratic support for the short-term funding bill, Majority Leader McConnell “promised” that the Senate would begin bi-partisan negotiations on immigration-related issues (ranging from certainty for the DREAMERs to a “border wall,” and a number of immigration issues in-between). Leader McConnell also promised that the Senate would debate these issues through “regular order” (i.e., Committee hearings, Senate floor debate, open amendment process). It is unclear whether the House will also approve the bill the Senate passed this afternoon. But most observers here in DC believe that the House will follow-suit later today, and that the President will sign the bill sometime tonight. Meaning, the government will be “back in business” starting tomorrow morning.
- Analysis: Importantly, this new, short-term funding bill includes a 6-year reauthorization of the CHIP program. AND, the bill includes the delays of the ACA taxes. Meaning, this funding bill – which will likely be signed by the President by tonight – includes: (1) A 1-year moratorium on the excise tax on health insurance carriers (for 2019), (2) A 2-year delay of the medical device tax (until 2020), and (3) A 2-year delay of the Cadillac Tax (until 2022). The only changes to the House-passed spending bill of last week included the following: (1) Changing the date for keeping the government funded – changed from Feb. 16th to Feb. 8th – and (2) Including a “Sense of the Senate” that memorialized the commitment among BOTH Republicans and Democrats to begin bi-partisan negotiations on immigration-related issues. So now, the employer and labor communities hold their breath for enactment of a 2-year delay of the Cadillac Tax. Same for the insurance carriers and the medical device manufacturers who have worked so hard for yet another delay of their respective industry excise taxes. Last comment: Health care-related issues that remain open include the “Medicare extenders” and other items like the CHRONIC Care package. Employers would also like to see some action on the employer mandate penalty taxes and also the ACA’s employer reporting requirements. It is unclear whether all of these health care-related issues will be addressed in the Feb. 8th funding bill (when Congress will once again have to fund the government for a specified period of time). It is sure bet – at least in my opinion – that the Medicare extenders will be addressed some time in Feb. (probably the Feb. 8th bill, but maybe in different legislative vehicle). Less of a chance – but certainly not 0% – are possible changes to the employer mandate penalties and/or the employer reporting requirements. Stay tuned.
Health Care Policy Update
- States like Maryland and California – in addition to other Democratic-leaning States – are exploring various ways to establish their own “mandate”-like provision in the wake of repeal of the “individual mandate” penalty tax. Maryland in particular – with assistance from Families USA – has recently floated a very interesting idea.
- Analysis: My response: Finally!! It’s about time that we heard from stakeholders with an idea on an alternative to the individual mandate penalty tax. My opinion: Regardless of your politics, there no reason not to give this idea some consideration. That is because this idea is somewhat of a hybrid of a financial penalty for failing to obtain health coverage (something that should appeal to Democrats), coupled with the establishment of an “interest-bearing” account and an automatic enrollment-like feature (something that should appeal to Republicans). As I have mentioned to you in the past, Republicans have been pursuing the idea of auto-enrollment as a means through which they can get young and healthy lives into the market without imposing a “stick,” like a penalty tax. And Democrats – while suggesting that they are open to ideas other than a penalty tax – seem satisfied with some sort of financial penalty, although Democrats would prefer the “carrot”-approach where they would like to increase the premium subsidy amounts so more consumers (even consumers in the 300% and 400% of Federal Poverty Level (FPL) cohort) can purchase more comprehensive coverage at a lower cost (and even make coverage “free” for those consumers below say 300% of FPL). But Democrats understand that the “carrot”-approach is not feasible because it requires more government spending, which is not easy to increase these days. So, in my opinion, Democrats have no other place to go than the “stick”-approach. This has led left-leaning stakeholders (like Families USA) and Democratic-leaning States (like Maryland) to develop a “mandate” idea that (1) imposes a financial penalty on those consumers without health coverage (i.e., a “stick”), but (2) consumers are given the opportunity to use the money they would otherwise pay in the form of a financial penalty, and direct that money toward purchasing an individual market plan (in my opinion, a creative spin on the “stick”-approach). In this case, if a consumer wants to use their financial penalty to purchase a health plan, the Maryland Exchange would work to find a plan that can be paid for with this money (coupled with a premium subsidy covering the remainder of the premium cost), and the State would enroll this consumer in a “zero-cost” plan. Voilà, this consumer now has coverage and is part of the risk pool. If there are NO “zero-cost” health plans that can be purchased with the financial penalty (and the premium subsidy) – and the consumer chooses NOT to enroll because they do not want to kick-in some of their own money toward a plan’s premiums – the consumer’s money could be placed in a “interest-bearing” account, and the consumer can draw on this money during the next “open enrollment” period to purchase a health plan. Democrats dare not call this “interest-bearing” account an HSA (i.e., Health Savings Account), although Republicans would love to attach this moniker. Soooo, the right-thing-to-do is to simply come up with another name to avoid the politics. That is arguably why this account is simply called an “Escrow Account.” In my opinion, the idea of allowing the financial penalty to sit in an “interest-bearing” account should be expanded to allow family members – or even an employer not otherwise offering a “group health plan” – to contribute tax-preferred dollars to the “Escrow Account.” Just sayin’… Now, during the next “open enrollment” period, if the consumer still does NOT have health coverage, the consumer will be notified that they can (1) use the financial penalty amount that has been earning “interest” in the “Escrow Account,” plus (2) another installment of their financial penalty (for going without insurance for another year), plus (3) any premium subsidy amount they may qualify for. If the consumer fails to enroll in a health plan by the end of “open enrollment,” the consumer will be automatically enrolled in a “zero-cost” health plan, if such a “zero-cost” plan is available to this consumer. If NO “zero-cost” plan is available, then the consumer will NOT be automatically enrolled, and the financial penalties will repossessed by the State (like a “use-it-or-lose-it” rule). Note, if a consumer is indeed automatically enrolled in a “zero-cost” plan, their coverage will NOT start until they affirmatively consent to the insurance carrier underwriting the plan that they want the coverage.
Does This “Individual Mandate” Alternative Have Legs? (no news story)
- As stated – to me – this idea should appeal to BOTH Republicans and Democrats.
- Analysis: For Republicans, there is an automatic enrollment feature, which – as I mentioned above – is something Republicans have been trying to incorporate into the individual market for some time now. In addition, there is an HSA-like feature in the form of this “interest-bearing Escrow Account.” Which – as I also mentioned above – should be augmented with an additional contribution feature from specified third-parties like a family member or an employer (which is an idea that Republicans may to consider suggesting). For Democrats – for-right-or-wrong – Democrats feel that some sort of “mandate” is necessary to get people into the risk pool. And, this idea has a “mandate”-like feature, which could indeed get more people into the market. In addition – at least in my opinion – Democrats are generally supportive of automatic enrollment, provided a consumer has the opportunity to opt-out. And most, if not all, Democrats support utilizing a tax-free “interest-bearing” account to further a social policy goal like obtaining health insurance, so long as you do NOT call the account “an HSA.” Last comment: This idea certainly has some complication to it. And, there will likely be a good amount of man and woman hours needed (1) to notify consumers about how they can utilize their financial penalty, (2) to look around and identify “zero-cost” health plans a consumer can enroll in, and (3) to administer the “interest-bearing Escrow Account.” I would argue that “certified” private-sector companies could provide these services more efficiently and effectively than the State government (or the Federal government, should this idea be enacted at the Federal level). Regardless of how best to structure this idea, a lot of credit should be given to Families USA and Maryland for developing and pursuing this proposal. In my opinion, other States and the Federal government should follow-suit (at least in those States that have an income tax, but I would argue that States that do NOT have an income tax are not foreclosed from adopting a similar idea).