ACA "Cadillac Tax" and Health Insurance Tax Delayed

On January 22, President Trump signed into law a short-term spending bill after it was passed by both chambers of Congress earlier that day. The bill includes 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 until 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 ACA’s excise tax on “high-cost” health plans, known as 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 When originally enacted with a 2018 effective date, the thresholds were $10,200 for self-only and $27,500 for family coverage.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, and the thresholds will be updated prior to the new Jan. 1, 2022 effective date.  

Health Insurance Industry Fee (“Health Insurer Tax”)
The short-term spending bill also suspends the Health Insurance Industry Fee for 2019. This sales tax on health insurance began in 2014 and affects the cost of 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.

Marshall & Sterling will provide additional information as it becomes available. Please do not hesitate to reach out with any questions, comments or concerns.

Disclaimer: The information contained in this message is for general informational purposes only and does not constitute legal advice.