Employee Benefits Compliance

2020 Spending Bill Repeals Some Affordable Care Act Taxes

us capitol

Congress recently passed the 2019-2020 Spending Bill (in two separate packages) that will keep the government running. The Bill also included three significant repeals of the Affordable Care Act (ACA) tax provisions, used to fund portions of the ACA such as premium tax credits. These very same ACA provisions were stayed in 2018, so it is no surprise these stays are now permanent repeals. The law is not law until the President signs it into law, which he is expected to do ahead of the December 20, 2019 deadline for the spending bill.

Repealed provisions include:

  • Health Insurer Tax (HIT) – A tax health insurance companies pay according to the amount of revenue they take in. This tax typically adds about 2-5% to premiums annually. Repealed beginning December 31, 2020.
  • Cadillac Tax – A 40% tax on generous, expensive health insurance plans set to take effect in 2022 following years of delays, will now be repealed before ever seeing the light of day.
  • 2.3% medical device tax – Set to restart January 2020 following a temporary stay is repealed as of December 31, 2019, this tax applied to medical device companies and amounted to 2-3%.

Repealing the health insurer tax would mean insurance companies no longer pass on the cost of that tax to employers/participants through higher premiums. This repeal also means ACA no longer has the funds to continue various integral parts of health care reform – leaving its future uncertain. The Joint Committee on Taxation estimated that the repeal of these three taxes mentioned herein would cost the federal government approximately $373 billion over ten years.

These repeals are in line with the Trump Administrations other attempts to water down the Obama-era rules, especially related to health care reform. As a result, it is expected that President Trump will sign the spending bill into law. The deadline to fund the government is December 20, 2019.

For complete details, see the packages HR 1865 here and HR 1158 here.

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