New Tax Breaks for Health Plans | Pennsylvania Benefit Advisors

Last week’s drama that shut down the federal government, then un-shut it three days later, was settled when agreement was reached on a Continuing Resolution. Included in the resolution are three tax breaks of particular interest to employers that offer group health coverage to their workers.

Cadillac Tax: Delayed until 2022

The Affordable Care Act (ACA) imposes a 40 percent excise tax on the value of employer-provided health coverage exceeding certain thresholds. This so-called Cadillac tax was scheduled to take effect in 2020 but now is delayed until 2022.

Efforts to repeal the Cadillac tax are expected to continue. It originally had been scheduled to take effect in 2018, then was delayed to 2020. This additional two-year delay, to 2022, provides further relief to employers while giving Congress time to consider permanent action.

Health Insurance Providers (HIP) Fee: Suspended for 2019

Starting in 2014, the ACA has imposed an annual fee on certain health insurers that generally is passed on to their policyholders. It affects insured plans, including medical, dental, and vision insurance, but does not apply to self-funded plans. Most advisors estimate the current fee impacts health insurance costs by 3 to 4 percent.

The HIP fee was suspended for 2017, then resumed for 2018. Last week’s resolution will provide another one-year moratorium: the fee is suspended for 2019.

Medical Device Tax: Suspended for 2018 and 2019

The ACA added a 2.3 percent excise tax on the sale of medical device products, starting in 2013. It was suspended for 2016 and 2017, then scheduled to resume for 2018. Analysts cite the tax as one factor in increased health care expenses that are passed on to health insurers and employers.

The new resolution suspends the medical device tax retroactively for 2018 and 2019.

ThinkHR continually monitors legislative and regulatory changes that affect employers and their benefit offerings.

Originally published by www.ThinkHR.com

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