Spending bill guts ACA taxes, medical device tax

President Trump signed the latest $1.4 trillion spending bills into law to fund the government and simultaneously gutted three taxes related to the Affordable Care Act: the health insurance tax, Cadillac tax and medical device tax.

The taxes were designed to help fund health insurance coverage expansion under the ACA. However, repeal of the taxes is “unsurprising” after they were delayed and unpopular on both sides of the political aisle, writes Katie Keith, JD, MPH, a principal at Keith Policy Solutions, for Health Affairs. Loss of the Cadillac tax will cut revenue $197 billion, followed by the health insurance tax $150.8 billion and the medical device tax $25.5 billion.

The health insurance tax (HIT) will remain in place in 2020, with a scheduled repeal in 2021. The Cadillac tax and the medical device tax will both be scrapped beginning 2020.

HIT, which acts as a sales tax on health insurance, has been a target of industry groups for some time, and has taken the blame for increasing the cost of healthcare coverage for everyone.

With respect to the medical device tax, the elimination brought on support from industry association The Advanced Medical Technology Association (AdvaMed). The medical device tax under the ACA implemented a 2.3% excise tax on devices. It went into effect in 2016 after being delayed since 2013.

“The medical device tax is officially history,” AdvaMed President and CEO Scott Whitaker said in a statement. “With the end of this burdensome tax, the U.S. medtech industry can do what it does better than anyone else in the world: develop life-changing innovations that save and improve patients’ lives, and create high-paying, high-tech jobs to keep the American economy booming.”

The Cadillac tax was a 40% tax on high-cost employer plans that intended to defer preferred treatment of employer-sponsored healthcare plans and help cut excess health spending. The tax never went into effect after it was delayed from its 2018 implementation date to 2022.

In addition to repealing the taxes, the spending bills included a continuation of silver loading for plan year 2021. Silver loading was a reaction by insurers after the Trump administration ceased making cost-sharing reduction payments in 2017, allowing insurers to increase premiums on silver-level plans.