Cadillac Tax and Health Insurance Tax Pushed Back

Late Monday evening, Jan. 22, Pres. Trump signed H.R.195 into law to end the government shutdown and fund the government through Feb. 8, 2018. The bill passed the House with a 266-159 vote and the Senate with an 81-18 vote.

Importantly, for employers and group health plans, the bill includes provisions to delay certain tax provisions within the ACA. Specifically, the bill includes a further delay in the implementation of the excise tax on high-cost employer-sponsored health coverage (the Cadillac tax), which is now set to take effect in 2022 (this was previously delayed until 2020). In addition, the bill includes a suspension of the annual Health Insurance Provider Fee (also known as the health insurance tax, or HIT) for 2019. The HIT was in moratorium in 2017. Therefore, the HIT is effective in 2018, on moratorium in 2019, and will be in effect again for 2020 and beyond. Finally, while less of a direct impact on employers, the bill includes a moratorium on the medical device excise tax, which is now set to apply for sales after Dec. 31, 2019.

The delay of the Cadillac tax and HIT is welcome relief for employers as they consider the impact both might eventually have on their plans. In addition to the delay, there appears to be bipartisan support for eventual repeal of the Cadillac tax. Regardless, employers should consult with counsel to consider whether plan amendments are necessary considering these recent changes.

H.R.195 »