Implementation of ACA High-Cost Plan Excise Tax Delayed Two Years

On Friday, December 18, the House and the Senate approved a major tax bill and an omnibus appropriations bill for fiscal year 2016 that includes a two-year delay in the Affordable Care Act’s (ACA) excise tax on high-cost, employer-sponsored health plans. These proposals were merged into a single bill, H.R. 2029, that has been signed into law by President Obama.

Also known as the “Cadillac tax,” the ACA’s 40 percent excise tax on health coverage exceeding threshold amounts was scheduled to be implemented beginning in 2018. Barring further action by Congress and the President, the tax now is scheduled to begin impacting health coverage in 2020. The legislation also makes the excise tax deductible for tax purposes.

The excise tax has proven to be a lightning rod for criticism, with business and labor groups calling on Congress to repeal the health law’s excise tax. The long-term outlook for the tax is uncertain.

Details on a number of issues relating to implementation of the excise tax are yet to be released. The IRS is expected to issue proposed regulations in 2016. To learn more about options for preparing for the excise tax, read an executive perspective piece on the tax* on Aetna.com’s Health Section.

Two ACA taxes suspended

Additionally, the omnibus appropriations bill signed into law contains some other key changes to the health care law. The ACA health insurance tax, which became effective in 2014, is suspended for one year (in 2017). The costs associated with this provision are estimated to be $12.2 billion according to the Joint Committee on Taxation. The ACA’s medical device excise tax is suspended for two years (2016-2017). The costs associated with this provision are estimated to be $3.9 billion according to the Joint Committee on Taxation.

For more information, see the Q&A on the ACA excise tax.