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Three ACA Taxes Repealed

December 23, 2019

The week of December 16, 2019, Congress passed two year-end spending agreements to fund the federal government until Sept. 30, 2020 (H.R. 1158 and H.R. 1865) and President Trump signed them into law.  One of the agreements, H.R. 1865 (the Further Consolidated Appropriations Act of 2020), included a full repeal of three taxes originally imposed by the ACA:

  1. Cadillac Tax
  2. Health Insurance Industry Fee (aka. Health Insurer Tax)
  3. Medical Device Tax

Cadillac Tax

The Cadillac Tax would have imposed a 40% excise tax on coverage on high-cost employer-sponsored health insurance. When originally enacted in the ACA, the thresholds were $10,200 for self-only and $27,500 for family coverage with a 2018 effective date.

In early December, more than 1,000 employers, insurers, unions and other organizations urged Senate leaders to scrap the Cadillac tax, which was set to go into effect in 2022.

The Cadillac Tax was delayed multiple times since passage of the ACA, and is now fully repealed, meaning it no longer exists and will never take effect.

Health Insurer Tax

H.R. 1865 also fully repeals the Health Insurer Tax, beginning in 2021. The $8 billion fee was implemented in 2014 and continued to increase each year. The fee only applied to insured plans (not self-funded plans) and was based on each insurer’s share of the taxable health insurance premium base.

Due to the adverse impact on health insurance premiums, the fee was suspended in 2017 and 2019. It is important to note that the fee will be in effect for 2020 as no suspension was granted for that year.  Then, it will be fully repealed effective 2021.

Medical Device Tax

The Medical Device Tax imposed a 2.3% excise tax on U.S. medical device revenues. The tax was in effect from 2013 through 2015.  It was then suspended from 2016 through 2019. H.R. 1865 fully repeals the tax, effective Dec. 31, 2019.

Things Left Out

Compromise legislation to address surprise medical bills and a major drug-pricing package were left out of the year-end package. Lawmakers delayed long-term action on funding expiration for several healthcare priorities until May 22, which provides another potential vehicle for those larger packages.

 

2020-Compliance-Calendar

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