The government shutdown has again come to an end … for now. On January 22, President Donald Trump signed a continuing resolution (CR) that temporarily funds the government through February 8 and delays implementation of the following taxes/fees created under the Affordable Care Act (ACA):
- Excise tax on the sale of certain medical devices
- High-cost employer health coverage excise tax (the “Cadillac tax”)
- Annual fee on health insurance providers
The Joint Committee on Taxation estimates the cost of these delays to be approximately $31.25 billion.
Medical Device Excise Tax
Under the ACA, Internal Revenue Code (IRC) Section 4191 imposed a 2.3 percent excise tax on the sale of certain medical devices by manufacturers, producers or importers. The tax was originally effective in 2013. The Protecting Americans from Tax Hikes Act of 2015 included a two-year moratorium on imposition of the tax for 2016 and 2017, but it’s slated to go back into effect for 2018. The CR suspends the medical device excise tax through December 31, 2019, and is retroactive to December 31, 2017.
The ACA created IRC §4980I, which imposes a 40 percent excise tax on any “excess benefit” provided to an employee covered under certain high-cost employer-sponsored insurance plans often referred to as “Cadillac plans.” This tax was originally scheduled to be effective in 2018 but was previously delayed until 2020 under the Consolidated Appropriations Act of 2016. The CR further delays the Cadillac tax until 2022.
Annual Fee on Health Insurance Providers
Section 9010 of the ACA imposed a fee on covered entities in business to provide health insurance. The fee is based on the amount of net premiums written by the health insurance entity. The Consolidated Appropriations Act of 2016 put a hold on collection of the annual fee for the 2017 calendar year. With the current CR, the fee is suspended for the 2019 calendar year but will still be effective for 2018.
To learn more, contact your trusted BKD advisor.