Repeal of Affordable Care Act (ACA) Taxes Is Complete

This post was authored by Shauna Waldin, Director of Compliance & Wellness at Rose and Kiernan, Inc.

This week the U.S. House of Representatives and the Senate both approved a $1.4 trillion spending package to avert a partial government shutdown, which includes provisions to permanently repeal several of the Affordable Care Act’s (ACA) taxes. The taxes on the chopping block include:

  • The 40% tax on “Cadillac” health plans – repealed effective Jan. 1, 2020
  • The 2.3% medical device tax (MDT) on the sale of medical devices such as catheters and pacemakers – repealed effective Jan. 1, 2020
  • The health insurance tax (HIT) – repealed effective Jan. 1, 2021

As many know, the ACA excise tax known as the “Cadillac Tax” was introduced as a way to reduce excess healthcare spending by incentivizing employers to lower costs to avoid getting hit by the tax. This highly unpopular 40% tax on high-cost employer medical plans had an original effective date of 2018, but has since had multiple delays applied to the implementation deadline. In its current form, the tax was slated to take effect in 2022.

As we reviewed earlier this year, the HIT was designed to help fund the federal and state marketplace exchanges and was taxed on fully-insured medical plans from 2014 – 2018.  For 2019, Congress approved a one-year moratorium but the HIT was expected to return for 2020 along with a $16 billion-dollar total fee.  

The spending package also includes large provisions for the U.S. Department of Defense, raising the minimum age for purchasing tobacco to 21 and 12 weeks of paid parental leave for federal employees. 

Rose & Kiernan, Inc. will continue to monitor all developments and advise on the final outcomes.

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