Key ACA Delays Included in Budget Deal

On Friday the U.S. Senate passed a $1.1 trillion omnibus spending bill and a $650 million tax break package that includes three key delays/moratoriums of taxes and fees associated with the Affordable Care Act.

The most noteworthy of the delays was  two year delay of the 40% excise tax on high-cost plans, commonly known as the Cadillac Tax. The Cadillac Tax, which would be imposed on the portion of group health plan premiums that exceed $10,200 for single coverage and $27,500 for family coverage was set to go into effect in 2018.  This delay postpones the much maligned tax to 2020. The bill also made any amounts paid as a result of the tax, tax deductible.

While the delay is a win for employers, the threat of the tax still looms large and many industry experts don't expect the delay to result in a significant change of course for companies planning to make benefit design changes and tweaks to stay below the tax.

According to the bipartisan nonprofit Committee for a Responsible Federal Budget, delaying the Cadillac tax until 2020 will cost the government $16 billion.

Another welcomed piece of the tax break package was a 2 year moratorium on the medical device excise tax. This tax is a 2.3 percent excise tax that manufacturers and importers must pay on sales of certain medical devices beginning Jan. 1, 2013.  Opponents of the tax argued that it was a hindrance to innovation and research and had a particular negative impact on smaller start up companies that typically have very thin margins in early years of operation.

The delay is estimated to subtract $3.4 billion from the federal budget between 2016 and 2017.

The final delay/moratorium was on the health insurer fee.  The health insurer fee is a tax on health insurance that insurance companies pay on their fully insured blocks of business. The amount of the tax was $8 billion in 2014 and increased by 41 percent for 2015. The tax is scheduled to total more than $145 billion over the next ten years. 

It's estimated that this tax had between  a 3% and 4% impact on fully insured policies over the last two years. Insurance companies will now not have to pay this fee for 2017.