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ACA’s Cadillac Tax Repealed
Previously delayed until 2022, the Affordable Care Act’s so-called “Cadillac Tax” has now been repealed entirely as part of a government spending bill signed into law on December 20, 2019. The excise tax, which was set at 40%, would have applied to employer-sponsored healthcare plans with annual premiums exceeding certain dollar thresholds for single or family coverage.
Fifth Circuit Affirms Unconstitutionality Of ACA Individual Mandate, Directs District Court To Reassess Whether Other Parts Of The Law Can Stand.
The U.S. Court of Appeals for the Fifth Circuit has ruled that the Affordable Care Act’s Individual Mandate is unconstitutional, partially upholding a controversial federal District Court decision out of Texas. Under the Individual Mandate as initially conceived, individuals who declined to purchase health insurance coverage could incur a monetary penalty known as the “shared responsibility payment.” In response to early legal challenges questioning Congress’s authority to establish the Individual Mandate, the U.S. Supreme Court construed the shared responsibility payment as a tax that fell within Congress’ power of taxation under the U.S. Constitution. However, according to the District Court and now the Fifth Circuit, this constitutional hook was eliminated when Congress reduced the shared responsibility payment to zero as part of the Tax Cuts and Jobs Act of 2017.
But the Fifth Circuit challenged the lower court on the issue of severability. According to the District Court, the Individual Mandate is inextricably linked to the ACA’s other parts such that they cannot be severed. The District Court, therefore, held that absent the Individual Mandate, the entire ACA, which includes various provisions directed at employers, is invalid.
Not so fast, said the Fifth Circuit. While declining to decide the severability issue itself, the Fifth Circuit criticized the District Court’s opinion for “not explain[ing] with precision how particular portions of the ACA as it exists post-2017 rise or fall on the constitutionality of the [I]ndividual [M]andate.” Accordingly, the Fifth Circuit remanded (i.e., sent the decision back to) the District Court, directing it to “employ a finer-toothed comb” and “conduct a more searching inquiry into which provisions of the ACA Congress intended to be inseverable from the individual mandate.”
So what does all of this mean for employers wondering about the status of the ACA’s employer-directed provisions? For now, the answer is very little. Absent congressional action, the ruling is likely to keep the operational parts of the ACA in legal limbo for several months, if not years. In the meantime, employers should continue to comply with the ACA’s employer shared responsibility provisions, restrictions on reimbursement arrangements that constitute “employer payments plans,” and various reporting requirements, as applicable. (See our Special Bulletin at lcwlegal.com/news for upcoming reporting deadlines.)