Funding Bill Provides Temporary Reprieve from Healthcare Taxes

Jan. 25, 2018

On Jan. 22, President Donald Trump signed into law H.R.195, a continuing resolution to fund the government through Feb. 8, 2018. In addition to ending the government shutdown, the legislation provides a temporary reprieve from the medical device excise tax, the excise tax on high-cost employer-sponsored health insurance (so-called Cadillac plans), and the annual fee on health insurance providers.

The medical device excise tax is a 2.3 percent excise tax imposed on taxable medical devices sold after Dec. 31, 2012, by a manufacturer, producer, or importer. A moratorium was placed on the tax for 2016 and 2017. The new legislation defers the imposition of the tax until 2020. The first payment for 2018 would have been due Jan. 29.

The 40 percent excise tax on Cadillac plans originally would have been assessed beginning in 2018 on employer-provided health plans with benefits exceeding statutorily defined maximums. The Protecting Americans From Tax Hikes Act of 2015 (PATH Act) previously delayed its effective date until 2020. The new legislation further delays its imposition until 2022.

The health insurance provider fee is imposed on certain health insurance providers based on their annual net health insurance premiums written. The fee, which first applied to tax years beginning in 2014, was suspended temporarily in 2017. The new legislation further delays its imposition until 2020.