On December 17 and 18th, respectively, the House and Senate passed a $1.1 trillion Omnibus Spending Bill, which includes a provision to delay the excise tax, commonly referred to as the “Cadillac tax”, on high cost, employer-sponsored health plans.
If signed into law by President Obama, the Omnibus Spending Bill would delay the tax, which will be tax deductible to the employer, by two years, pushing back its effective date to 2020.
The delayed implementation of the Cadillac tax, which imposes a 40% excise tax on the portion of group health plan premiums that exceed $10,200 for single coverage and $27,500 for family coverage, would signal a step towards full repeal of the Patient Protection and Affordable Care Act. The delay also provides relief to employers who have taken aggressive measures to maintain rising health care costs below the tax thresholds and additional time for employers to better manage their health care costs.
When the Cadillac tax does become effective, it will be to the detriment of both employers (who will pay if they offer rich employee health benefit plans), or to employees who will pay out-of-pocket for health care costs if their health benefits are diluted, so that uncovered expenses remain their financial obligation.
The Omnibus Spending Bill also includes a freeze on the Affordable Care Act’s medical device tax for 2016 and 2017. The tax went into effect in 2013. Finally, the bill commissions a study by the U.S. Comptroller General and the National Association of Insurance Commissioners to determine whether the Affordable Care Act uses a “suitable” benchmark to determine whether the excise tax thresholds should be adjusted to reflect age and gender factors of the employer’s workforce.
The President is expected to sign the bill.