Congress Kicks the Can; Employers Get Cadillac Tax Reprieve

The budget and tax package passed by Congress on December 18, 2015 includes a two-year delay of the Affordable Care Act (ACA) excise tax on high-value health plans (a.k.a., the Cadillac tax). The president is expected to sign the bill into law. What does that mean for sponsors of health benefit plans? Let’s take a closer look.

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Does this mean everything related to the Cadillac tax is pushed back to 2020?
Yes, the Cadillac tax was slated to begin in 2018, but the new law pushes back the start date to 2020.

Is there anything employers need to do now?
Employers can take a breath! They have two more years to study and implement the best ways for their plans to postpone and avoid the tax as long as possible.

What will this mean for the elections?  Will this take ACA out of the political bantering?
This delay “kicks the can” of the Cadillac tax to the next Congress and the next presidential administration. Most of the candidates running for president say they support a complete repeal of the Cadillac tax. The delay also gives those who oppose the excise tax more time to pursue a repeal of it.

It will not remove the issue from the political bantering. There are many organizations on both ends of the political continuum that support a repeal of the tax. They say the tax promotes the trend of health care cost shifting to workers. However, there are also many economists and ACA supporters who are opposed to the repeal. They view the excise tax as an essential pillar of the law because it funds other provisions of ACA and is designed to slow the rise in health care costs and make the health care system more efficient.

[ACA University Webcast, Thursday, February 4:
Private Exchanges: What You Need to Know

What about all the scrambling for ACA reporting?  Any impact?
No, the new law does not affect the ACA reporting requirements due to begin in early 2016.

The new spending and tax package does include a few additional changes to other ACA-related provisions such as:

  • A two-year suspension (2016 and 2017) of the 2.3% medical device tax (a tax that is often passed on to health care purchasers through increased prices)
  • A one-year suspension (2017) of the tax on health insurers (a tax that is usually passed on to health care purchasers, including health plan sponsors such as employers and multiemployer health funds)
  • Tax deductibility of the cost of the Cadillac tax by organizations that must pay it
  • Research to evaluate the best baseline for the age and gender adjustments allowed for the Cadillac tax thresholds.

Stay tuned to the International Foundation. We’ll continue to keep you informed about important ACA developments on ACA Central, ACA University and Regulatory Updates.

Kelli Kolsrud, CEBS
Kelli Kolsrud, CEBS
Director, Information Services and Publications at the International Foundation

 

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