Congress appears to be ready to pass a large spending bill that is set to repeal 3 major health taxes that were put in place by the Affordable Care Act. This bill would fully repeal the Cadillac tax, a 2.3 percent tax on medical devices, and a health insurance fee, three major taxes health care industry lobbyists have been fighting since their implementation.
To help you get a better understanding of what these repeals may mean for you and for government health care funding, below our experts at Tax Defense Partners take a closer look at these three health care taxes.
The Repeal of the Cadillac Tax
The Cadillac tax is a 40% excise tax on high-cost employer medical plans that is paid by health insurance issuers. This tax was designed to disincentivize employers from providing very high cost health insurance plans for their employees, as well as to fund ACA provisions. The Cadillac tax applies to employer-provided health insurance plans that cost more than $11,200 per year for individual policies or $30,150 for family coverage.
The Cadillac tax has been a fairly unpopular tax for some time among both Democrats and Republicans. Lawmakers and economists who are against the Cadillac tax say that this tax would essentially shift health care costs from employers to employees.
The Cadillac tax has actually never been fully in place, though it passed when the ACA passed. It was first delayed by lawmakers in 2015, then delayed again in 2018 until 2020. And if the new spending bill passes and is signed into law by President Trump (which experts say is expected), the Cadillac tax is set to be fully repealed, meaning it may never go into effect.
The Repeal of the 2.3% Tax on Medical Devices
The Medical Device Excise Tax is a 2.3% tax on certain types of medical devices that has been paid by the manufacturers or importers of these devices. Unlike the Cadillac tax, the Medical Device Tax has been intermittently implemented. But like the Cadillac tax, the Medical Device Tax has been controversial, with many in the medical device manufacturers industry saying it unfairly harms the economy within the industry.
The Repeal of the Health Insurance Fee
The ACA contained an annual multi-billion dollar standard health insurance fee. When it has been active, this fee has been assessed proportionately among health care providers that have had net premiums for health insurance during a given year. Like the Medical Device Tax, the health insurance fee has been intermittently implemented since it was passed, with several moratoriums passed by lawmakers that have paused the tax.
This health insurance fee has been incredibly unpopular with health insurance providers, who have lobbied hard to see it fully repealed. It has also been unpopular with economists and lawmakers who say this tax will surely be passed along to individuals who will see their premiums rise as a result of the tax.
The 3 Health Care Tax Repeals and Government Funding
While the three health care taxes that are set to be repealed in the new spending bill have not been particularly popular, especially among health care industry lobbyists, the two that were implemented have raised significant funds for ACA provisions. With the repeal of these taxes, large portions of ACA funding will be eliminated, which could pose a problem for the national deficit. While the funding for ACA programs is set to be cut with the new spending bill, ACA spending is not.