New Budget Bill Repeals Three Affordable Care Act Taxes

Health Insurance Tax, Cadillac Tax and Medical Device Tax

January 21, 2020  

The new federal budget bill signed by President Trump on Dec. 20, 2019, includes the full repeal of three of the Affordable Care Act’s most significant taxes: the Health Insurance Tax, the Cadillac Tax and the Medical Device Tax. These taxes were designed to help pay for the ACA’s coverage expansion.

  • The Health Insurance Tax applies to all insurers that offer fully insured health insurance in the group market, the marketplaces, or public programs (such as Medicare and Medicaid). The tax, which already has been built into many premiums for the 2020 plan year, will remain in effect for 2020. Repeal of the tax will not take effect until 2021.
  • Tufts Health Plan has long advocated for repeal of the Health Insurance Tax because it increases premiums for employer-sponsored plans. We consider this move by Congress to be a significant step toward greater plan affordability.
  •  The Cadillac Tax would have imposed a 40-percent tax on employer plans that exceed a certain amount in premiums. The tax was designed to discourage high-cost, employer-sponsored coverage. Initially scheduled to take effect in 2018, the Cadillac Tax was delayed first to 2020 and, most recently, to 2022 – so it had never actually gone into effect. 
  • The Medical Device Tax imposes a 2.3-percent tax on the domestic sale of medical devices, such as pacemakers, X-ray machines, MRI machines and others. The tax is repealed beginning in 2020. It initially went into effect in 2013 but was suspended by Congress from 2016 to 2020.

Source: “ACA Provisions in New Budget Bill,” HealthAffairs, Dec. 20, 2019

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