The recently signed (1/22/2018) “short-term spending bill”, also referred to as the “continuing resolution” (CR) does more than keep the United States government open and fully functioning until February 8, 2018. It also delivers yet another set of Affordable Care Act (ACA) delays. Employers offering group health insurance to their employees can breathe a collective sigh of relief as virtually ALL employers offering ALL types of group health insurance (i.e., small group, large group, fully insured, self-funded) will benefit from these delays. Here’s what’s happening and when….
1. CADILLAC TAX
The ACA’s so called Cadillac tax, originally set to take effect this year (2018), and previously delayed by congress to 2020, is now delayed until 2022. But wait….there’s more!!! The triggers for Cadillac tax applicability are required to be reset prior to the implementation of the Cadillac tax, which is welcome news to affected employers. So originally, benefit amounts that exceeded annual, cumulative thresholds set by the ACA ($10,200 for employee only coverage; and $27,500 for employee plus dependent(s) coverage) would be subject to a 40%, employer directed excise tax. The recently passed, 2018 CR bill requires these thresholds to be reset prior to 2022. The Cadillac tax applies to all forms and types of group health insurance.
For a review of the Cadillac tax, see – https://smstevensandassociates.com/acas-cadillac-tax/
2. HEALTH INSURANCE INDUSTRY FEE/HIT
The HIT tax only applies to fully insured group health insurance plans, and originally took effect in 2014. This tax added 2% – 2.5% to premiums in 2014, then ramped up to 3% – 4% in 2015 and beyond, and is collected and remitted by insurers to the federal government. This tax increases in future years commensurate with premium increases. Congress suspended the HIT tax for 2017, but it resumes in 2018. Per the CR, it is now set to be suspended for 2019, resulting in reduced premiums to impacted employers beginning in 2019.
3. MEDICAL DEVICE TAX
Although the medical device tax does not have a direct impact on health insurance, it definitely has a cost shifting impact on the ultimate cost of coverage. Originally taking effect in 2013, Congress suspended the medical device tax, which applies a 2.3% tax on revenues derived from the sale of U.S. medical devices, for 2016 and 2017. The CR now delays this tax through 2019. Presumably this tax would resume in 2020, barring an additional delay or repeal.
Importantly, the ACA’s Comparative Effective Research Fee (CERF), which applies to all group health insurance plans, is NOT delayed by the CR. So affected employers must still comply with the collection and remittance of this tax. Generally speaking, insurers collect and remit this tax on behalf of fully insured plans, and partially self-funded employers must calculate/collect/remit this tax in July of each year.
For a review of the CERF, see – https://smstevensandassociates.com/search?q=cerf
Note: The ACA’s transitional reinsurance fee, which applied to all group health insurance plans from 2014 – 2016, went away after 2016 and is no longer applicable.
(see – https://smstevensandassociates.com/acas-transitional-reinsurance-fee-tax/)