On Jan. 22, 2018, President Donald Trump signed a short-term continuing spending resolution into law to end the government shutdown and continue funding through Feb. 8, 2018. The continuing resolution impacts the following three taxes and fees under the Affordable Care Act (ACA):
- Cadillac tax
- Health insurance providers fee
- Medical device excise tax
Cadillac Tax
The ACA imposes a 40 percent excise tax on high-cost group health coverage, also known as the “Cadillac tax.” The resolution delays implementation of the Cadillac tax for two years, until 2022. There is some indication that the two-year delay will lead to an eventual repeal of the tax altogether.
Health Insurance Providers Fee
Beginning in 2014, the ACA imposed an annual, nondeductible fee on the health insurance sector, allocated across the industry according to market share. The resolution provides an additional one-year moratorium on the health insurance providers fee for the 2019 calendar year. However, it specifically declines to extend the moratorium through 2018. Therefore, the fee continues to apply for the 2018 calendar year.
Medical Device Excise Tax
The ACA also imposes a 2.3 percent excise tax on the sales price of certain medical devices, effective beginning in 2013. The continuing resolution extended a moratorium on collection of this tax for an additional two years, through the 2019 calendar year. As a result, the medical devices tax will not apply to any sales made between Jan. 1, 2016, and Dec. 31, 2019.
Next Steps
Employers should be aware of the evolving applicability of existing ACA taxes and fees so they know how the ACA affects their bottom lines. AUI will continue to keep you informed of changes.
