Cadillac Tax and Health Insurer Tax Delayed in Spending Bill
On Jan. 22, President Trump signed into law a short-term spending bill (called a Continuing Resolution or “CR”) to reopen and fund the federal government for three weeks (through Feb. 8, 2018) after it was passed by both chambers of Congress earlier in the day. Attached to the bill are delays or suspensions of three taxes under the Affordable Care Act (ACA) and a six-year extension of the Children’s Health Insurance Program (CHIP).
The 40% Excise Tax or “Cadillac Tax” implementation is delayed two additional years, with a new effective date of Jan. 1, 2022. The Health Insurance Industry Fee is suspended for one year (2019) and the Medical Device Tax is suspended for two years (2018-2019).
The Cadillac Tax imposes a 40% excise tax on coverage in excess of certain thresholds. When originally enacted with a 2018 effective date, the thresholds were $10,200 for self-only and $27,500 for family coverage. The tax has since been delayed twice (including this delay), and the thresholds will be updated prior to the new Jan. 1, 2022 effective date. Many employers, unions, insurers and industry groups have opposed the tax based on concerns around administrative and financial burdens for employers and adverse outcomes for employees.
Health Insurance Industry Fee (a.k.a. Health Insurer Tax)
The short-term spending bill also suspends the Health Insurance Industry Fee for 2019. This fee began in 2014 and only affects insured health plans. It was previously suspended for 2017, but went back into effect on Jan. 1, 2018.
Medical Device Tax
Previously suspended for 2016 and 2017, the 2.3% excise tax on U.S. medical device revenues also restarted on Jan. 1, but will now remain suspended for two years through the end of 2019