Congress has delayed for two years implementation the Affordable Care Act’s controversial “Cadillac Tax” on costly plans, suspended for two years the on medical devices.
The changes were included in a compromise government spending bill hammered out long after midnight on Wednesday, Dec. 16, which the White House had previously signaled it would approve.
The “Cadillac Tax ,” intended to generate revenues to help offset the cost of the , applies only to the most expensive employer-provided plans. It imposes a 40% – payable by companies – on total premiums paid by employer employee that exceed $10,200 per year for an individual, or $27,500 for a .
(For example, a policy with an annual premium $32,500 would be subject to an excise $2,000, or 40% the $5,000 the premium that is over the threshold.)
The was supposed to go into effect in 2018. The late-night amendment to the omnibus federal spending plan approved by Congress postponed that to 2020. As a result, employers companies have more time to adjust their strategies for high-value plans.
From the time the ACA was passed, the has been the target strong criticism from politicians on both sides the aisle in Congress, as well as from many large employers, unions even non-profit organizations.
Employers objected to the limitations it imposed on the benefits they are able to offer to key employees. Unions non-profits believed that the excise , although paid by insurers, would be reflected in higher premiums for all employees, or less generous benefits packages offered by employers.
The “Cadillac Tax ” has also been criticized because the threshold for taxable premiums is linked to the Consumer Price Index, rather than the higher rate inflation in the cost medical .
The excise would affect only about 6% all employees, according to the Tax Policy Center.
The budget package amendment also included a moratorium for 2016 2017 on the provision in the ACA that imposed a 2.3% on medical devices. Payable by device manufacturers, the went into effect in 2013.
The goal the medical device was to help support the costs of the ACA by capturing some the increased profits device firms would generate from sales to a larger pool of insured patients. Critics have argued that its cost was being passed along to all patients receiving the devices, that it unfairly taxed revenues rather than profits.
