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Medical Device, Cadillac Taxes Further Delayed by Shutdown Bill

Posted in Affordable Care Act, Employer/Employee Matters, Legislation and Public Policy, Life Sciences, Medical Devices, Private Insurers, Tax Matters/IRS

The stopgap funding bill that ended the brief federal government shutdown included a provision further delaying the 2.3% excise tax on medical device manufacturers that was imposed by the Affordable Care Act. The tax was originally intended to fund health insurance subsidies, but an omnibus spending bill signed by President Obama in 2015 (discussed here) suspended it until this year.The current hiatus will run for two years and the device tax will be reinstated for 2020, unless Congress acts again to further delay or eliminate it. The medical device industry and members of both major political parties had opposed the tax. The two years of tax revenue lost will cost the federal government more than $3 billion, according to the Congressional Budget Office.

The new funding bill also included a further two-year delay of the ACA’s “Cadillac tax” on pricey health plans. Beginning this year, employers were to have begun paying a 40% tax on health plan costs exceeding $10,200 for individual coverage and $27,500 for family coverage. Congress’s Joint Committee on Taxation estimated that the delay will save employers almost $15 billion over the two years.

The funding bill also suspended for one year a tax on health insurers that will save them more than $12 billion.

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