Tax Reform Bill Includes Repeal of Individual Mandate Beginning in 2019

Article | December 2017

Tax Reform Bill Includes Repeal of Individual Mandate Beginning in 2019

On Dec. 20, Congress passed the Tax Cuts and Jobs Act, which makes significant changes to individual and corporate provisions of the U.S. tax code, including a reduction in the corporate tax rate to 21%, down from 35%, beginning in 2018. The bill includes permanent effective repeal of the Affordable Care Act (ACA) individual mandate, requiring individuals to purchase and maintain health coverage, by zeroing out the penalty beginning in 2019. For 2018, most individuals are still required to maintain coverage or pay a penalty when they file their 2018 federal income tax return.

The bill was negotiated by a conference committee comprised of representatives from both the Senate and House after each chamber passed their own versions of tax reform. The final bill was passed 51-48 by the Senate and 224-201 by the House before being sent to the President. President Trump is expected to sign the bill into law soon.

The bill also changes how certain tax thresholds will be indexed for inflation. Affected provisions, including the ACA “Cadillac” Tax (scheduled to take effect in 2020), will now be indexed to the Chained Consumer Price Index (CPI) instead of the regular CPI (the previous metric). That change makes it likely that more employer-sponsored plans would trigger the Cadillac tax sooner.

Judicial challenge: Expanded exemption for covering contraceptive services

As we shared in our Oct. 13 alert, the Administration expanded the ACA contraceptive coverage exemption through the Interim Final Rules (IFRs) released by the Department of Health and Human Services on Oct. 6. On Dec. 15, a Pennsylvania federal court temporarily blocked the IFRs, ruling that the language of the ACA does not allow for such exemptions.

Since the preliminary injunction was issued by a federal court, the new IFRs cannot be enforced in any state unless or until it is removed. The injunction maintains the status quo. It does not impact exemptions or accommodations to the contraceptive coverage requirement granted prior to Oct. 6, 2017. Employers who may have been newly eligible for an exemption under the IFRs can only seek the exemption if they qualify under the previous contraceptive coverage mandate rules and follow the accommodation process. The Administration is expected to appeal this decision.

Staying Informed

To stay up to date on the evolving state of health care reform, visit Informed on Reform, including the new Repeal and Replace Update webpage.

Brought to you by Cigna Health Care Reform Consulting and Communications (HCRCC).