After much debate and anxiety over proposed taxes and the Affordable Care Act, three ACA taxes were repealed under a recent government spending bill passed early this year, putting an end to some excise taxes, though reinstating others.
The “Cadillac Tax” is out. A 40 percent excise tax on high-cost employer-provided health care plans, the tax was originally proposed to take effect in 2018. However, legislation had been twice delayed and was again set to go into effect in 2022. However, the 2020 Further Consolidated Appropriations Act permanently repeals the tax so it will never go into effect—a major win for employers.
A 2.3 percent excise tax on medical devices is out. First implemented in 2012, the Internal Revenue Service (IRS) issued final regulations on the tax that manufacturers and importers pay on sales of specific medical devices. Recent legislation has repealed the medical device excise tax previously imposed by Internal Revenue Code section 4191. Prior to the repeal, the tax was on a four-year moratorium. As a result of the repeal and the prior moratorium, sales of taxable medical devices after December 31, 2015, are not subject to the tax.
The Health Insurance Providers Fee has also been repealed, but not until January 2021. This means fees will still be charged for 2020. This law has been in effect since 2015, but had been suspended in 2017 and 2019. The tax imposes a fee on each covered entity engaged in the business of providing health insurance. The tax is placed on insurers but is inevitably passed on to employers and their employees. The fee to be paid in the 2020 fee year is based on the 2019 data year. There will be no fee after the 2020 fee year (2021 calendar year).
In addition, the Patient-Centered Outcomes Research Institute (PCORI) has been extended. The PCORI fee, charged to insurers and employers with self-insured plans, was originally instituted to fund medical research under the ACA. The last PCORI fee payment was expected to occur on July 31, 2019 or July 31, 2020 for non-calendar year plans. However, this fee is now extended until 2030.