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Congress Acts on Key Business-Related Health Care Provisions

  • Implementation of Excise Tax on High Cost Employer-Sponsored Health Coverage ("Cadillac Tax") delayed from January 1, 2020 to January 1, 2022.
  • Suspension of Medical Device Excise Tax extended until January 1, 2020.
  • Moratorium on Health Insurance Provider Fee extended until January 1, 2020.
  • Funding for Children's Health Insurance Program extended for six years.

On January 23, 2018, Congress passed and the president signed into law a bill to provide continued government funding until February 8. The Continuing Resolution bill, H.R. 195, Extension of Continuing Appropriations Act 2018, Healthy Kids Act, includes the following provisions related to health care and/or the Affordable Care Act (ACA):

Cadillac Tax

This provision delays implementation of the Excise Tax on High Cost Employer-Sponsored Health Coverage (also known as the "Cadillac Tax") from January 1, 2020 to January 1, 2022. The Cadillac Tax refers to a 40 percent tax charged on amounts in excess of established thresholds and is to be paid by an insurance company or plan sponsor (in the case of self-insured plans). In general, the thresholds of $10,200 (individual) and $27,500 (family) are an aggregate of the total cost of health coverage. It should be noted, there are carve-outs and exceptions to these thresholds.

Even if the employers are not responsible for paying the tax--because they do not sponsor a self-insured plan--they are still responsible for calculating the total excess and dividing the amounts pro-rata across the various plans. This is the second two-year delay for this tax. This delay gives employers additional time to evaluate the impact of this tax on their health offerings.

Medical Device Excise Tax

This provision extends the suspension of the Medical Device Excise Tax (contained in the ACA) until January 1, 2020. The Medical Device Excise Tax imposed a 2.3 percent excise tax on the sale of specific medical devices that manufacturers and importers of these devices were required to pay. In 2015, Congress imposed a two-year moratorium regarding the tax. As a result, this tax did not apply through the end of 2017.

Health Insurance Provider Fee

This provision extends the moratorium on the Health Insurance Providers Fee (contained in the ACA) until January 1, 2020. Originally, the ACA imposed this fee on covered entities that provide health insurance. Exclusions exist for certain governmental entities, self-insured employers, and some nonprofits.

Children's Health Insurance Program (CHIP)

This provision extends funding for the Children's Health Insurance Program for six years. CHIP provides low-cost health coverage to the children of families that make too much money to qualify for Medicaid. Without federal funding, many states would need to draw on revenue sources elsewhere or dramatically scale back the program. This helps alleviate uncertainty for state budgets for the next six years.

Next Steps

February 8 is right around the corner. Negotiations in Congress continue towards funding the government for the remainder of the fiscal year. If by February 8th, Congress cannot agree on a path forward, the threat looms of another government shut-down. Several items still to be negotiated prior to this date include appropriate funding levels for various government entities. More controversial issues dealing with immigration, including the Deferred Action for Childhood Arrivals (DACA), also await resolution.


laurie savage headshot

Laurie Savage is a compliance professional and subject matter expert on the Affordable Care Act (ACA) for Paychex Inc. Specializing in Health Care Reform at both the state and federal level, since 2007, she has helped Paychex assess the regulatory and legislative implications that affect their clientele. Additionally, Laurie has also been called upon to research and vet due diligence efforts for both domestic and international opportunities for her organization.

This website contains articles posted for informational and educational value. Paychex is not responsible for information contained within any of these materials. Any opinions expressed within materials are not necessarily the opinion of, or supported by, Paychex. The information in these materials should not be considered legal or accounting advice, and it should not substitute for legal, accounting, and other professional advice where the facts and circumstances warrant.
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