The ACA in 2017: The Cadillac Tax and More

Posted: May 3, 2017


In 2017, there have been several attempts by Congress to repeal the ACA (Affordable Care Act). Congress is working on a new proposal, after they pulled their previous attempt in March. Because of this, the taxes and fees associated with the ACA are here to stay for 2017. While it seems clear that Congress will continue their efforts to repeal and replace the ACA, and thus its fate is unclear, we do know there will be definite changes for 2017. These changes include a delay on the Cadillac Tax and other fees. How these changes will impact you depends on your group or individual situation, but we’re here to help you make sure you know where you stand.

What are the changes: the Cadillac Tax and other fees explained

First, the most important of these changes relates to delaying the institution of the “Cadillac Tax” on high-cost group insurance until 2020. Previously, the ACA imposed a 40% excise tax on high-cost group plans. The tax covers the monthly cost for the plan which exceeds the employee’s annual limitation. The 2016 budget delayed the implementation of the tax to 2020, and amended it. It removed a prohibition for deducting the Cadillac Tax as a business expense, and it required a study to look into the age and gender adjustments to the annual limitation.

Second, the budget bill has stopped collection of the provider’s fee and medical device taxes mandated by the ACA. The provider’s fee charged annual fees to health providers, who in turn passed those fees on to their customers. The medical device fee placed a tax on certain medical devices, payed by the producers, but it was again passed on to the consumers. The government will not collect the provider’s fee in 2017. The medical device tax will not be collected for two years, until 2018.

Finally, this is the last year in which reinsurance fees paid by providers and self-funded groups to help stabilize premiums through the exchange will be collected. The transitional reinsurance program supported by these fees only operated until 2016. Thus, this year is the last year the government will collect the fee. Going forward, providers and self-funded group will be not be responsible for these fees.

What does it mean for you?

Self-funded groups are responsible for only one more year of the reinsurance fee. If you have questions about how to make this payment, please feel free to get in touch with us, and we can help you through the process. Groups that offer a benefits package eligible for the Cadillac Tax will not need to worry about it until 2020. Although this seems a long way off, it’s never too late to start planning to be ready. Let us know if you think your benefits package is eligible for the Cadillac Tax. We would be glad to help you prepare for when Congress implements the tax. We can also provide strategies to help your employees manage this tax. All told, the definite changes to the ACA mean fewer fees passed on to consumers, a delay of the Cadillac tax, and the end of the reinsurance fee.


Matt Leine

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