Cadillac Tax and Health Insurance Tax Delayed

By Gibson - Jan 24, 2018 12:03:00 PM

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

H.R. 195 doesn't simply open our government back up for business. Notably for employers and group health plans, the bill includes provisions to delay certain tax provisions within the ACA. The bill: 

  • Includes a further delay in the implementation of the excise tax on high-cost, employer-sponsored health coverage, aka the Cadillac tax, which is now set to take effect in 2022, after being previously delayed until 2020.
  • Suspends the annual Health Insurance Provider Fee, also known as the health insurance tax or HIT, for 2019. It was previously suspended in 2017, was set to become effective in 2018, now on moratorium in 2019, and will be in effect again for 2020 and beyond, barring any other congressional interference.
  • Includes a six-year reauthorization of the Children's Health Insurance Program (CHIP)
  • Places a moratorium on the medical device excise tax, which is now set to apply for sales after Dec. 31, 2019.

Quick Reminders

  • The Cadillac tax imposes a 40 percent excise tax on the amount of aggregate monthly premium on each primary-insured individual that exceeds the certain year's applicable dollar limit.
    • These frequent delays and Capitol Hill buzz also appear to show bipartisan support for an eventual repeal of the Cadillac tax entirely.
  • The HIT is a sales tax on health insurance with a fee set annually by the Treasury to raise a specific amount of revenue.
    • The HIT tax is not tax deductible and is imposed on "net" health insurance premiums.
    • The HIT applies to insurers, meaning self-insured employers are exempt. 
The delays of both the Cadillac tax and HIT will grant some employers a welcome sigh of relief, considering the impact both could eventually have on their benefits planning. Regardless, employers should consult with counsel to consider whether plan amendments are necessary in light of these recent changes.

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