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ACA Compliance Bulletin: Cadillac Tax and Other Key ACA Taxes Repealed

On December 20, 2019, President Trump signed into law a spending bill funding the government through September 2020.  The bill also contains legislation that repeals three fee and tax components of the Affordable Care Act (ACA):

  • The Cadillac Tax on high-cost group health coverage. This tax would have imposed a 40% excise tax on generous employer-provided health insurance plans, i.e., those plans costing more than $11,200 per year for individual coverage or $30,150 for family coverage, beginning in 2020.
  • The Medical Devices Excise Tax. This tax would have imposed a 2.3% excise tax on the cost of certain medical devices sold in the United States beginning in 2020; and
  • The Health Insurance Providers (HIP) Fee. This fee was set to begin in 2021; the HIP fee was to impose a fee upon insurance providers who provide fully-insured health insurance policies for United States health risks.  Insurers would have been responsible for paying the fee, but they would have taken this additional cost into account when determining the premiums they charge to employers. So, although employers would not have paid the fee directly, it would have affected the premiums they pay for group health insurance.

It is important to note that the above fee and tax components of the ACA were a part of the initial legislation, however each were delayed in being implemented due to their unfavorable impact on health plan costs.

The funding bill also reinstates the Patient-Centered Outcomes Research Institute (PCORI) fee for the 2020 – 2029 fiscal plan years. The PCORI fee is a fee on issuers of specified health insurance policies and plan sponsors of applicable self-insured health plans that is used to help fund the PCORI’s research to assist patients, and those who care for them, in making better-informed decisions about their healthcare.  Thus, employers who offer self-funded group medical plans and insurance carriers of fully-insured medical coverage must continue to pay the applicable fees through the 2029 fiscal year.

The attached ACA Compliance Bulletin provides an overview of the taxes and fees repeal as well as the extension of the PCORI fee as mentioned above. You may also find of interest our recent legislative alert that provides information on the Secure Act, which was part of the signed funding bill.  

Read the Compliance Bulletin.

Contact your Cowden representative for more information on this or other compliance issues.