ACA Excise Tax on High Cost Health plans | Mercer US

Mercer Takes to the Hill to Talk Excise Tax

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Mercer Takes to the Hill to Talk Excise Tax
Calendar15 June 2015

Mercer met with Congressional staff on June 11 to provide input on developing legislation that would modify the ACA’s 40% excise tax on high-cost plans. Mercer recently submitted comments to the IRS on how to implement the tax starting in 2018, but more fundamental reform can only be achieved through enactment of new legislation.

In our meeting, we outlined guiding principles that should provide a framework for evaluating any legislative change to the excise tax. These principles include:

  • Plan value — The tax should not apply to typical plans, regardless of plan cost. Employers should not be penalized if costs are high due to factors such as geography, coverage of a high-cost population, and industry.
  • Plan cost — The tax should not apply to plans that effectively control costs, regardless of actuarial value. Employers — and their employees — should continue to benefit from cost management initiatives, including health management and network/ supply-side strategies.
  • Innovation — The legislation should promote programs and plan features that encourage optimal healthcare use.
  • Predictability — The tax should be predictable when setting future year plan offerings or negotiating collective bargaining agreements. The calculation methodology should appropriately combine standardization and actuarial judgment.
  • Simplicity — The process for determining and submitting the tax should be straightforward.

The excise tax passed as part of the ACA does not meet these objectives. We explained the benefits of legislation that would allow plans to avoid the tax by either maintaining costs below a dollar threshold (with adequate annual increases) or by satisfying a safe harbor through offering plans with an actuarial value no higher than a specified threshold. We shared Mercer survey data and other statistics illustrating the dramatic relief that could be achieved if the proposed legislation becomes law. Hill staff was keenly interested in the issues we raised and the supporting data. We will continue to share data and our perspective to support new legislation that can benefit plan sponsors.

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