“Cadillac Tax” And Health Insurance Industry Fee Delayed In Spending Bill

February 12, 2018  |  ACA: Affordable Care Act, Taxes
Benefits Connection

- info taken from Cigna’s “Informed on Reform”

President Trump signed into a law short-term spending bill to reopen and fund the federal government through February 8, 2018. 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 January 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).

Cadillac Tax

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 When originally enacted with a 2018 effective date, the thresholds were $10,200 for self-only and $27,500 for family coverage.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 been delayed twice, and the thresholds will be updated prior to the new January 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 (Health Insurer Fee)

The short-term spending bill also suspends the Health Insurance Industry Fee for 2018. The fee began in 2014 and only affects insured health plans. It was previously suspended for 2017, but went back into effect on January 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 January 1, but will now remain suspended for two years through the end of 2019.