Latest continuing resolution reauthorizes funding for CHIP, delays ACA tax provisions

On January 22, 2018, the President signed a continuing resolution (CR) to maintain funding for the federal government at current levels through February 8, 2018, while reauthorizing federal funding for the Children’s Health Insurance Program (CHIP) for six years through fiscal year 2023 and delaying the effective date of some taxes and fees enacted as part of the Affordable Care Act (ACA).

With an eye on the new February 8 deadline, Congress will be working on negotiations related to spending caps, appropriations for the remainder of fiscal year 2018 and a number of outstanding health care issues.

Highlights of the health care provisions of the most recent CR are provided below.

CHIP reauthorization

The CHIP reauthorization appropriates $21.5 billion for FY2018 for CHIP, increasing to $25.9 billion by FY 2023, while winding down the enhanced Federal Medical Assistance Percentage match currently ranging between 88 to 100 percent for children from families with incomes as high as 300% of the Federal Poverty Level. After a one-time increase for FY 2020, CHIP match would follow the baseline matching funds percentages. During that time, states are under a maintenance-of-effort requirement as a condition of Medicaid funding.

Other CHIP provisions are also extended, including funding for the Medicaid and CHIP “Express Lane,” which allows enrollment in both programs based on eligibility for other federal programs, as well as $120 million in CHIP outreach and enrollment grants, and a pediatric quality measures program and childhood obesity demonstration.

ACA taxes and fees

The CR further extended delays to the effective dates of the ACA’s medical device excise tax, the health insurer fee, and the excise tax on high-cost employer-sponsored health coverage (“Cadillac tax”).

First, the CR includes a two-year delay on the 2.3% on the Medical Device Excise Tax, extending the moratorium on the excise tax through December 31, 2019. A previous moratorium enacted as part of a 2015 funding agreement expired on December 31, 2017. The medical device excise tax was collected from 2013 to 2015.

Second, the CR will suspend for 2019 the ACA’s health insurer fee, which applies to most health insurance plans. Like the medical device excise tax, the most recent moratorium on the health insurer fee expired on December 31, 2017; thus, the fee will be in effect for 2018. The fee, created by Section 9010 of the ACA, sets specific annual revenue targets for the health insurer fee, culminating with a target of $14.3 billion in 2018, with subsequent annual revenue targets increased in relation to ongoing premium growth.

Finally, the CR further delays the effective date of the Cadillac tax to tax years beginning on or after December 31, 2021. The same 2015 funding agreement that included the moratoria on the medical device excise tax and the health insurer fee included the first two-year delay to the Cadillac Tax, which originally was set to begin January 1, 2018. The 40% excise tax will apply to the value of certain employer-sponsored health benefits exceeding set threshold levels: $10,800 for individual coverage, or $29,050 for all other coverage, indexed for inflation.

Other health care issues unresolved

Congress still faces a number of other health care issues in the near term due to expiring authorities and other pressing issues. For example, a number of temporary Medicare payment policies, known collectively as the “Medicare Extenders,” have lapsed. The Medicare Extenders include several rural health payment adjustments, the reauthorization of Medicare Advantage Special Needs Plans, exceptions on caps for certain medical therapies covered under Medicare, as well as State Health Insurance Programs that counsel individuals about their Medicare choices. In addition, federal funding for the Community Health Center Program expired on September 30, 2017; previously authorized federal funding is expected to last through March 31, 2018. Congress also may consider legislation to restore payments to health plans on ACA Exchanges for cost-sharing reduction subsidies (CSRs) and provide federal funding for state reinsurance programs for ACA Exchanges as part of an effort to maintain stabilization of the insurance markets in 2018.

Authors:

Anne Phelps
Principal | Deloitte Risk and Financial Advisory
US Health Care Regulatory Leader
Deloitte & Touche LLP
Latest conversations from Anne Phelps on Twitter

Daniel Esquibel
Senior Manager | Deloitte Risk and Financial Advisory
Deloitte & Touche LLP

Ethan Joselow
Manager | Deloitte Risk and Financial Advisory
Deloitte & Touche LLP

This article contains general information only and Deloitte is not, by means of this article, rendering accounting, business, financial, investment, legal, tax, or other professional advice or services. This article is not a substitute for such professional advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified professional advisor.

Deloitte shall not be responsible for any loss sustained by any person who relies on this article.

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