President Signs Deal to Delay Cadillac/Excise Tax

The misguided and poorly written Cadillac tax has been delayed, after even the Democratic authors of the bill came to realize the damage it would cause.  The legislation also changes two other items:

  • Impose a one-year moratorium on the collection of the ACA’s health insurance providers fee, for 2017; and
  • Impose a two-year moratorium on the ACA’s medical device excise tax, for 2016 and 2017.

Here is the news announcement from NAHU:


“NAHU is pleased to share with you that President Obama has now signed legislation that will delay the Cadillac/excise tax for two years. The provision was included in a $1.8 trillion omnibus government spending and tax-break package.


The Cadillac tax calls for a 40% excise tax on the amount of the aggregate monthly premium of each primary insured individual that exceeds the year’s applicable dollar limit, which will be adjusted annually to the Consumer Price Index (CPI) plus 1% initially and then CPI. Given that the pace of medical inflation is well beyond that of general inflation, the tax is destined to outgrow itself in short order and many employers will be impacted by the cost of the tax and the enormous compliance burden that the tax creates. Mercer estimated that a third of employers would be subjected to the tax by 2018 when it was originally set to kick in, and that 60% of employers could be hit by 2022. Because of the projected wide reaching effect of the tax, many employers may be deterred from offering coverage.


The delay of the Cadillac/excise tax is effective for 2018 and 2019, meaning that without further legislative adjustment or repeal, the tax will now be scheduled to take effect beginning in January 2020. Language in the package also permanently makes the tax deductible to employers and calls for a study by the comptroller on appropriate age and gender adjustments in consultation with the National Association of Insurance Commissioners (NAIC). NAHU supports the delay of the Cadillac/excise tax as a short-term measure, but we remain fully committed to a complete repeal of the tax given its projected widespread impact on employer-provided insurance coverage, and will continue to work with the Department of Treasury as they develop regulations to implement the tax in 2020. Inclusion of these delays can be an important first step to achieve complete repeal, but in the short term, we hope the delays will bring some relief to your clients.


NAHU is a leading advocate, along with our partners in the Alliance to Fight the 40 and theNational Coalition on Benefits, and we will continue to make our push to elected officials urging them to fully repeal the tax in the New Year.”