By: Kelly Dempsey, Esq.
On January 22, 2018 the House and the Senate passed a continuing resolution that impacts three taxes imposed by The Affordable Care Act (ACA). The most notable in the self-funded industry is the ACA’s High Cost Employer-Sponsored Health Coverage Excise Tax (“Cadillac Tax”). The Cadillac Tax was originally set to begin in 2018, but has been delayed (again) for an additional two years putting the start date at January 1, 2022. The Cadillac Tax is a 40% excise tax on employer-sponsored health coverage that provides high-cost benefits.
Similar to the prior legislation passed in December 2015, this new legislation also:
1. Suspends the ACA Health Insurance Provider Tax for 2019; and
2. Delays the ACA Medical Device Tax until 2020.
The ACA Health Insurance Provider Tax is applicable for fully-insured plans and is effective for 2018. With this legislation, the tax will pick back up in 2020.
The ACA Medical Device Tax is applicable to medical device manufacturers and importers and imposes a 2.3% levy on the sales of commonly used medical devices (defibrillators, pacemakers, artificial joints, heart stents, etc.).
The three delays together cost an approximate $31 billion.
On a positive note, the continued resolution extends the Children’s Health Insurance Program (CHIP) for an additional six years.
While 2022 seems far away, employers should still be mindful that the Cadillac Tax has not been fully repealed and the possibility still exists that it could one day take effect. This is important because wellness programs and on-site clinics have grown tremendously in popularity over the past several years. Both wellness programs and on-site clinics would be included in the Cadillac Tax calculations – meaning employers would likely be dis-incentivized to continue these programs. For now it is too early to start planning for changes - this is just one more item keep on the back burner (just don’t turn the burner off).