Cadillac Tax and Other Key ACA Taxes Repealed

President Trump recently signed a spending bill preventing a government shut-down and repealed the following three taxes and fees under the Affordable Care Act (ACA):

• Cadillac Tax on high-cost group health coverage, beginning 2020;
• Medical Devices Excise Tax, beginning in 2020; and
• Health Insurance Providers Fee, beginning in 2021

Importantly, the bill also extended the Patient-Centered Outcomes Research Institute (PCORI) fee to years 2020 to 2029.

Cadillac Tax

The tax initially imposed a 40% excise tax on high-cost group health coverage, if the monthly cost of an employee’s employer-sponsored coverage exceeded certain annual limits. The Cadillac Tax was originally supposed to take effect in 2013 but endured continued delays, which eventually resulted in the repeal of the tax in its entirety for 2020.

Health Insurance Providers Fee

The Health Insurance Providers Fee was originally imposed in 2014. There were subsequent moratoriums with a one-year moratorium placed in 2019. For 2020, the fee is in place. In many cases, the fee is imposed by providers of insured plans (e.g. fully-insured medical, fully-insured dental and fully-insured vision plans) and passed onto employers through monthly premiums. This fee will end beginning in the 2021 calendar year.

Medical Devices Excise Tax

The ACA imposed a 2.3% tax on the sales of certain medical devices, originally effective in 2013. There were multiple moratoriums placed on this tax, resulting in it never being imposed. As planned, the manufacturers and importers of these devices were responsible for the tax. This tax was officially repealed for 2020.

PCORI Fees

Under ACA, this fee was created to help patients, clinicians, payers and the public make better informed health decisions through advances in research. The fees were scheduled to apply for policy or plan years ending on or after October 1, 2012 and before October 1, 2019. The fee is due every July 31. The spending bill reinstated the PCORI fee for 2020-2029 fiscal years.

Action Steps

Employers should familiarize themselves with the fees and evolving laws and regulations. We will continue to monitor information regarding the applicability and process for PCORI fee payments for current fees (policy years ending prior to October 1, 2019) as well as future fees that are required.