Tuesday, January 7, 2020

Three ACA Taxes Repealed

Special Submission by Nick Cianci

$1.4 trillion in spending was approved in December to fund the government through the rest of the fiscal year and avoid a potential shutdown. The two agreements (H.R. 1158 and H.R. 1865) include nearly $50 billion in new spending. 

Of note to healthcare and parallel industries is H.R. 1865, the Further Consolidated Appropriations Act of 2020, and the full repeal of three taxes included in the Affordable Care Act (ACA). These include the Cadillac Tax, the Health Insurer Tax, and the Medical Device Tax, which were originally levied by Congress to help pay for the ACA.

Actuaries at the Centers for Medicare and Medicaid Services published a report which documented the trends of our nation’s healthcare-spending growth in 2018. The U.S. greatly surpasses most wealthy, comparable countries and continues to trend upward. National health-care spending rose 4.6% from 2017 to 2018 and accounted for 17.7% of last year’s economy.

According to the report, the ACA tax is accountable for most of this increase. The controversy lies in the competing efforts to fund the act and the ultimate effect of raising insurance premiums, hurting the consumer. The ACA taxes have been linked to a rise in the cost of private insurance, which grew 15.3% last year to $164 billion.

In response to these trends, the following three taxes were repealed from the Affordable Care Act.

The Cadillac Tax: The so-called Cadillac Tax was a 40% excise tax on high-cost employer health insurance above certain thresholds. This tax has been permanently repealed, though it never actually took effect.

The Health Insurer Tax: The Health Insurer Tax was based on the insurer’s share of taxable health insurance premium base and is said to have had the most direct impact in spurring the growth of U.S. health-care spending. The fee was implemented in 2014 and had continued to increase annually. Though it was suspended in 2017 and 2019, due to the adverse impact on premiums, the fee will be effective in 2020 and repealed in 2021.

The Medical Device Tax: The Medical Device Tax was in effect between 2013-2015, suspended from 2016-2019, and scheduled to resume in January. This 2.3% excise tax on U.S. medical device revenues has been repealed effective December 31, 2019.

Missing from both spending agreements is any mention of protecting consumers from surprise, out-of-network medical bills after a lengthy congressional effort to create an effective, bipartisan proposal.  Read the final spending package here.

Nick Cianci is President of Compass Total Benefits Solutions and works directly with AHCA/NCAL Insurance Solutions to provide AHCA/NCAL members with employee health benefit options such as the Compass Minimum Essential Coverage plan.  

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