On Jan. 22, 2018, President Donald Trump signed into law a short-term continuing spending resolution to end the government shutdown and continue funding through Feb. 8, 2018. The continuing resolution impacts three taxes and fees under the Affordable Care Act (ACA).
Specifically, the continuing resolution:
- Delays implementation of the Cadillac tax on high-cost group health coverage until 2022;
- Provides an additional one-year moratorium on the health insurance providers fee for 2019 (although the fee continues to apply for 2018); and
- Extends the moratorium on the medical device excise tax for an additional two years, through 2019.
Cadillac Tax Delayed
The ACA imposes a 40 percent excise tax on high-cost group health coverage, also known as the “Cadillac tax.” This provision taxes the amount, if any, by which the monthly cost of an employee’s applicable employer-sponsored health coverage exceeds the annual limitation (called the employee’s excess benefit). The tax amount for each employee’s coverage will be calculated by the employer and paid by the coverage provider who provided the coverage.
Although originally intended to take effect in 2013, the Cadillac tax was immediately delayed until 2018 following the ACA’s enactment. A federal budget bill enacted for 2016 further delayed implementation of this tax until 2020, and also:
- Removed a provision prohibiting the Cadillac tax from being deducted as a business expense; and
- Required a study to be conducted on the age and gender adjustment to the annual limit.
The continuing resolution delays implementation of the Cadillac tax for an additional two years, until 2022.
Moratorium on the Providers Fee
Beginning in 2014, the ACA imposed an annual, nondeductible fee on the health insurance sector, allocated across the industry according to market share. This health insurance providers fee, which is treated as an excise tax, is required to be paid by Sept. 30 of each calendar year. The first fees were due Sept. 30, 2014.
The 2016 federal budget suspended collection of the health insurance providers fee for the 2017 calendar year. Thus, health insurance issuers were not required to pay these fees for 2017. However, this moratorium expired at the end of 2017.
The continuing resolution provides an additional one-year moratorium on the health insurance providers fee for the 2019 calendar year. However, the continuing resolution specifically declines to extend the moratorium through 2018. Therefore, the fee continues to apply for the 2018 calendar year.
Employers are not directly subject to the health insurance providers fee. However, in many cases, providers of insured plans have been passing the cost of the fee on to the employers sponsoring the coverage. As a result, this one-year moratorium may result in significant savings for some employers on their health insurance rates.
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