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Update on ACA Taxes and Fees

Posted on February 18th, 2020

The Affordable Care Act (ACA) includes several taxes to fund various parts of the healthcare law, such as Medicaid expansion and Health Insurance Marketplace subsidies. Since the ACA became law, there have been debates in Congress about many of the taxes. Some have argued for repeal, some have argued for change and others have argued for extensions of various tax components of the law. Some of this actually occurred at the end of 2019 when President Donald Trump signed a $1.4 trillion spending package that eliminated three of the ACA’s taxes while extending one that was expected to sunset later this year. In case you missed it, here is a quick breakdown: 


Cadillac Tax Repealed 

The so-called Cadillac tax has been repealed. It was originally supposed to take effect in 2018 but was delayed on more than one occasion and was on pace to take effect in 2022. This tax would’ve imposed a 40% excise tax on the value of group health plans that exceeded certain thresholds. It is believed that several employers would’ve been hit with significant tax penalties or they would’ve had to make significant changes to their benefit offerings to reduce or eliminate this tax had it taken effect. There is no longer that worry.  

Health Insurer Tax Repealed

The Health Insurer Tax (commonly referred to as the “HIT” fee) is a multi-billion dollar annual tax charged to insurance companies. The HIT fee was added to insurance premiums of fully insured plans causing those premiums to be higher as a result. The HIT fee was suspended in 2019, is effective for 2020 and will be fully repealed in 2021. 

Medical Device Tax Repealed

The ACA added a 2.3% tax to the sales price of several medical devices. This tax had been suspended since 2016 and was scheduled to become effective again this year; however, the spending package has repealed the medical device tax effective in 2020. 

PCORI Fees Extended

The ACA created a research institute known as the Patient Centered Outcomes Research Institute (PCORI) to help individuals and their caretakers make more informed healthcare decisions. PCORI has been funded in part by fees charged to health plans. The last round of PCORI fees charged to health plans was expected to be paid later this year; however, the spending package has reinstated PCORI fees for an additional 10 years through the fiscal year ending in 2029 (with final payments made in 2030). Employers and insurance carriers can expect to pay these fees for the foreseeable future. 


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