Even though the delay of the Cadillac tax is a major relief for ACA opposition, many tend to overlook the imposition of other major tax deferments. The Cadillac tax, or a 40% taxation of high-cost group coverage originally intended to take effect in 2013, is pushed back even further from its initial delay and now set to take effect in 2020. It is no surprise that the tax’s effective date has been pushed back almost seven years, especially due to the strong resistance it has faced thus far. As some business owners breathe a sigh of relief, the delay of two additional taxes by the Obama Administration: the medical device excise tax and the ACA’s health insurance providers fee, seems to go relatively unnoticed.
The new federal budget bill, signed by President Obama on December 18th, 2015, not only delays the Cadillac tax but removes the provision that prohibits the tax from being deducted as a business expense, and requires a study to be conducted on the age and gender annual limit adjustment. Some argue that this could be a fair sign that the tax will be repealed altogether. Nonetheless, this bill does more than delay one largely unpopular tax from taking effect, but postpones two others that may put a dent in the medical industry, both in manufacturing and healthcare.
The medical device excise tax imposes a 2.3 percent tax on sales and import of certain medical devices beginning in 2013, though the 2016 federal budget suspended collection of this tax for two years. The tax is now set to roll out in 2018. In general, the manufacturer or importer of certain medical devices, including MRI machines, pacemakers, and X-Ray machines, would be responsible for the reporting and payment of this tax to the IRS.
Fortunately for employers, the collection of the health insurance providers fee was granted a one year moratorium. This annual, non-deductible fee on fully insured group and individual policies began in 2014 and ranges from 2% to 4% of premium, depending on the size of the insurer. The bill stipulates that 2016 plans are not subject to the fee, which would have been collected in 2017. Employers are not directly responsible for this fee, although many insurers have been passing the full fee on to policyholders and employers via premium increases. This reprieve could result in significant savings for affected plans.
Find additional details about these delays directly from IRS.gov below: