DESCRIPTION OF H.R. 4616,

A BILL TO AMEND THE PATIENT PROTECTION AND AFFORDABLE 

CARE ACT TO PROVIDE FOR A TEMPORARY MORATORIUM ON 

THE EMPLOYER MANDATE AND TO PROVIDE FOR A DELAY IN

THE IMPLEMENTATION OF THE EXCISE TAX ON HIGH-COST 

EMPLOYER SPONSORED HEALTH COVERAGE

Scheduled for Markup

by the

HOUSE COMMITTEE ON WAYS AND MEANS

on July 11, 2018

Prepared by the Staff

of the

JOINT COMMITTEE ON TAXATION

July 10, 2018

JCX-61-18
i

CONTENTS

Page

INTRODUCTION .......................................................................................................................... 1

A. Moratorium on Employer Mandate .................................................................................... 2

B. Delay in Implementation of Excise Tax on High Cost Employer-Sponsored Health 

Coverage ............................................................................................................................. 4
1

INTRODUCTION

The House Committee on Ways and Means has scheduled a markup on July 11, 2018, of 

H.R. 4616, a bill to amend the Patient Protection and Affordable Care Act to provide for a 

temporary moratorium on the employer mandate and to provide for a delay in the 

implementation of the excise tax on high-cost employer-sponsored health coverage. This 

document,1 prepared by the staff of the Joint Committee on Taxation, provides a description of 

the bill. 

 1

 This document may be cited as follows: Joint Committee on Taxation, Description of H.R. 4616, A Bill 

to Amend the Patient Protection and Affordable Care Act to Provide for a Temporary Moratorium on the Employer 

Mandate and to Provide for a Delay in the Implementation of the Excise Tax on High-Cost Employer-Sponsored 

Health Coverage. (JCX-61-18), July 10, 2018. This document can also be found on the Joint Committee on 

Taxation website at www.jct.gov. All section references herein are to the Internal Revenue Code of 1986, as 

amended, unless otherwise stated.
2

A. Moratorium on Employer Mandate

Present Law

In general

An applicable large employer, as defined below, may be subject to a tax, called an 

“assessable payment,” for a month if one or more of its full-time employees is certified to the 

employer as receiving for the month a premium assistance credit with respect to health insurance 

purchased through an Exchange (commonly referred to as the “employer mandate”).2

 As 

discussed below, the amount of the assessable payment depends on whether the employer offers 

its full-time employees and their dependents the opportunity to enroll in minimum essential 

coverage under a group health plan sponsored by the employer and, if it does, whether the 

coverage offered is affordable and provides minimum value. 

Definitions of full-time employee and applicable large employer

 Applicable large employer generally means, with respect to a calendar year, an 

employer who employed an average of at least 50 full-time employees on business days during 

the preceding calendar year. For purposes of these rules, full-time employee means, with respect 

to any month, an employee who is employed on average at least 30 hours of service per week. 

Solely for purposes of determining whether an employer is an applicable large employer (that is, 

whether the employer has at least 50 full-time employees), besides the number of full-time 

employees, the employer must include the number of its full-time equivalent employees for a 

month, determined by dividing the aggregate number of hours of service of employees who are 

not full-time employees for the month by 120. In addition, in determining whether an employer 

is an applicable large employer, members of the same controlled group, group under common 

control, and affiliated service group are treated as a single employer.3

 If the group is an 

applicable large employer under this test, each member of the group is an applicable large 

employer even if any member by itself would not be an applicable large employer.

Assessable payments

If an applicable large employer does not offer its full-time employees and their 

dependents minimum essential coverage under an employer-sponsored plan and at least one 

full-time employee is so certified to the employer, the employer may be subject to an assessable 

payment (for 2018) of $2,320 (divided by 12 and applied on a monthly basis) multiplied by the 

 2

 Sec. 4980H. As discussed in Part A, premium assistance credits under section 36B apply with respect to 

health insurance purchased through an Exchange. An employer may also be subject to an assessable payment if an 

employee received reduced cost-sharing with respect to coverage purchased through an Exchange as discussed in 

Part A.

3

 The rules for determining controlled group, group under common control, and affiliated service group 

under section 414(b), (c), (m) and (o) apply for this purpose.
3

number of its full-time employees in excess of 30, regardless of the number of full-time 

employees so certified. 

Generally an employee who is offered minimum essential coverage under an 

employer-sponsored plan is not eligible for a premium assistance credit or reduced cost-sharing 

unless the coverage is unaffordable or fails to provide minimum value.4

 However, if an 

employer offers its full-time employees and their dependents minimum essential coverage under 

an employer-sponsored plan and at least one full-time employee is certified as receiving a 

premium assistance credit or reduced cost-sharing (because the coverage is unaffordable or fails 

to provide minimum value), the employer may be subject to an assessable payment (for 2018) of 

$3,480 (divided by 12 and applied on a monthly basis) multiplied by the number of such 

full-time employees. However, the assessable payment in this case is capped at the amount that 

would apply if the employer failed to offer its full-time employees and their dependents 

minimum essential coverage.

Description of Proposal

Under the proposal, the employer mandate does not apply to any month beginning after 

December 31, 2014, and before January 1, 2019.

Effective Date

The proposal is effective for taxable years beginning after December 31, 2018.

 4

 Coverage under an employer-sponsored plan is unaffordable if the employee’s share of the premium for 

self-only coverage exceeds 9.5 percent of household income, and the coverage fails to provide minimum value if the 

plan’s share of total allowed cost of provided benefits is less than 60 percent of such costs.
4

B. Delay in Implementation of Excise Tax on High

Cost Employer-Sponsored Health Coverage

Present Law

In general

Effective for taxable years beginning after December 31, 2021, an excise tax is imposed 

on the provider of applicable employer-sponsored health coverage (the “coverage provider”) if 

the aggregate cost of the coverage for an employee (including a former employee, surviving 

spouse, or any other primary insured individual) exceeds a threshold amount (referred to as “high 

cost health coverage”).5 The tax is 40 percent of the amount by which aggregate cost exceeds 

the threshold amount (the “excess benefit”). 

The annual threshold amount for 2018 is $10,200 for self-only coverage and $27,500 for 

other coverage (such as family coverage), multiplied by a one-time health cost adjustment 

percentage.6

 This threshold is then adjusted annually by an age and gender adjusted excess 

premium amount. The age and gender adjusted excess premium amount is the excess, if any, of 

(1) the premium cost of standard FEHBP coverage for the type of coverage provided to an 

individual if priced for the age and gender characteristics of all employees of the employer, over 

(2) the premium cost of standard FEHBP coverage if priced for the age and gender 

characteristics of the national workforce. For this purpose, standard FEHBP coverage means the 

per employee cost of Blue Cross/Blue Shield standard benefit coverage under the Federal 

Employees Health Benefit Program.

The excise tax is determined on a monthly basis, by reference to the monthly aggregate 

cost of applicable employer-sponsored coverage for the month and 1/12 of the annual threshold 

amount.

Applicable employer-sponsored coverage and determination of cost

Subject to certain exceptions, applicable employer-sponsored coverage is coverage under 

any group health plan offered to an employee by an employer that is excludible from the 

employee’s gross income or that would be excludible if it were employer-sponsored coverage.7

Thus, applicable employer-sponsored coverage includes coverage for which an employee pays 

on an after-tax basis. Applicable employer-sponsored coverage includes coverage under any 

group health plan established and maintained primarily for its civilian employees by the Federal 

 5

 Sec. 4980I, was added to the Code by section 9001 of PPACA and amended by section 10901 of PPACA 

and section 1401 of HCERA. The effective date was subsequently changed by section 1401(b)(2) of Pub. L. No. 

111-152, section 101(a) of Pub. L. No. 114-113, and section 4002 of Pub. L. No. 115-120. 

6

 The health cost adjustment percentage is 100 percent plus the excess, if any, of (1) the percentage by 

which the cost of standard FEHBP coverage for 2018 (determined according to specified criteria) exceeds the cost of 

standard FEHBP coverage for 2010, over (2) 55 percent.

7

 Section 106 provides an exclusion for employer-provided coverage.
5

government or any Federal agency or instrumentality, or the government of any State or political 

subdivision thereof or any agency or instrumentality of a State or political subdivision. 

Applicable employer-sponsored coverage includes both insured and self-insured health 

coverage, including coverage in the form of reimbursements under a health flexible spending 

account (“health FSA”) or a health reimbursement arrangement and contributions to a health 

savings account (“HSA”) or Archer medical savings account (“Archer MSA”).8

 In the case of a 

self-employed individual, coverage is treated as applicable employer-sponsored coverage if the 

self-employed individual is allowed a deduction for all or any portion of the cost of coverage.9

For purposes of the excise tax, the cost of applicable employer-sponsored coverage is 

generally determined under rules similar to the rules for determining the applicable premium for 

purposes of COBRA continuation coverage,10 except that any portion of the cost of coverage 

attributable to the excise tax is not taken into account. Cost is determined separately for selfonly coverage and other coverage. Special valuation rules apply to retiree coverage, certain 

health FSAs, and contributions to HSAs and Archer MSAs. 

Calculation of excess benefit and imposition of excise tax

In determining the excess benefit with respect to an employee (i.e., the amount by which 

the cost of applicable employer-sponsored coverage for the employee exceeds the threshold 

amount), the aggregate cost of all applicable employer-sponsored coverage of the employee is 

taken into account. The threshold amount for self-only coverage generally applies to an 

employee. The threshold amount for other coverage applies to an employee only if the employee 

and at least one other beneficiary are enrolled in coverage other than self-only coverage under a 

group health plan that provides minimum essential coverage and under which the benefits 

provided do not vary based on whether the covered individual is the employee or other 

 8

 Some types of coverage are not included in applicable employer-sponsored coverage, such as long-term 

care coverage, separate insurance coverage substantially all the benefits of which are for treatment of the mouth 

(including any organ or structure within the mouth) or of the eye, and certain excepted benefits. Excepted benefits 

for this purpose include (whether through insurance or otherwise) coverage only for accident, or disability income 

insurance, or any combination thereof; coverage issued as a supplement to liability insurance; liability insurance, 

including general liability insurance and automobile liability insurance; workers’ compensation or similar insurance; 

automobile medical payment insurance; credit-only insurance; and other similar insurance coverage (as specified in 

regulations), under which benefits for medical care are secondary or incidental to other insurance benefits. 

Applicable employer-sponsored coverage does not include coverage only for a specified disease or illness or 

hospital indemnity or other fixed indemnity insurance if the cost of the coverage is not excludible from an 

employee’s income or deductible by a self-employed individual.

9

 Section 162(l) allows a deduction to a self-employed individual for the cost of health insurance.

10 Sec. 4980B(f)(4).
6

beneficiary. For purposes of the threshold amount, any coverage provided under a 

multiemployer plan is treated as coverage other than self-only coverage.11

The excise tax is imposed on the coverage provider.12 In the case of insured coverage 

(i.e., coverage under a policy, certificate, or contract issued by an insurance company), the health 

insurance issuer is liable for the excise tax. In the case of self-insured coverage, the person that 

administers the plan benefits (“plan administrator”) is generally liable for the excise tax. 

However, in the case of employer contributions to an HSA or an Archer MSA, the employer is 

liable for the excise tax. 

The employer is generally responsible for calculating the amount of excess benefit 

allocable to each coverage provider and notifying each coverage provider (and the IRS) of the 

coverage provider’s allocable share. In the case of applicable employer-sponsored coverage 

under a multiemployer plan, the plan sponsor is responsible for the calculation and notification.13 

Description of Proposal

Under the proposal, implementation of the excise tax on high cost employer-sponsored 

health coverage is delayed until after December 31, 2020. 

Effective Date

The proposal is effective for taxable years beginning after December 31, 2018. 

 11 As defined in section 414(f), a multiemployer plan is generally a plan to which more than one employer 

is required to contribute and that is maintained pursuant to one or more collective bargaining agreements between 

one or more employee organizations and more than one employer.

12 The excise tax is allocated pro rata among the coverage providers, with each responsible for the excise 

tax on an amount equal to the total excess benefit multiplied by a fraction, the numerator of which is the cost of the 

applicable employer-sponsored coverage of that coverage provider and the denominator of which is the aggregate 

cost of all applicable employer-sponsored coverage of the employee.

13 The employer or multiemployer plan sponsor may be liable for a penalty if the total excise tax due 

exceeds the tax on the excess benefit calculated and allocated among coverage providers by the employer or plan 

sponsor.