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Congress-Passed Spending Bill Contains Health Law Funding Provisions

Congress has passed the Consolidated Appropriations Act of 2016 (Appropriations Act), which contains provisions on the “Cadillac tax” and the health insurance provider fee. On December 18, the House passed the Appropriations Act by a vote of 316 to 113, and the Senate passed it by a vote of 65-33. The Act is expected to be signed into law by the President.

Imposition of Cadillac Tax Delayed Until 2020

Under pre-Appropriations Act law, for tax years beginning after December 31, 2017, a 40% excise tax would have applied to any “excess benefit” provided to any employee who is covered under any applicable employer-sponsored coverage at any time during a “taxable period” (generally a year, but this may vary).

RIA observation: Plans providing this “high-cost” coverage are often referred to as “Cadillac plans,” and the related tax is often referred to as the “Cadillac tax.”

New law. Under the Appropriations Act, the excise tax on high cost employer-sponsored health care will become effective for tax years beginning for tax years beginning after December 31, 2019. (Appropriations Act §101(a)DivP)

RIA observation: Thus, the Cadillac tax won’t be imposed until 2020.

Congress Orders Study on More Suitable Benchmarks for Age and Gender Adjustment of Cadillac Tax

Under the Cadillac excise tax applicable to health coverage costs exceeding an “annual limit” (the implementation of which has been postponed, see above), the premium cost of the Blue Cross/Blue Shield standard benefit option under the Federal Employees Health Benefits Plan is used as a benchmark for an age and gender adjustment of the applicable dollar limit.

New law. Not later than 18 months after the Appropriations Act’s enactment date, the Comptroller General, with the National Association of Insurance Commissioners, must report to the Senate Finance Committee and the House Ways and Means Committee on the suitability of the use (in effect under Code Sec. 4980I(b)(3)(C)(iii)(II) as of the Appropriations Act’s enactment date) of the premium cost of the Blue Cross/Blue Shield standard benefit option under the Federal Employees Health Benefits Plan as a benchmark for the age and gender adjustment of the applicable dollar limit with respect to the excise tax on high cost employer-sponsored health coverage under Code Sec. 4980I. Further, the Comptroller General must make recommendations regarding any more suitable benchmarks for such age and gender adjustment. (Appropriations Act Sec. 103DivP)

Annual Fee Imposed on Health Insurance Providers is Suspended for Calendar Year 2017

Under pre-Appropriations Act law, section 9010 of the Affordable Care Act (ACA, PL 111-48) imposed an annual fee on each covered entity engaged in the business of providing health insurance with respect to U.S. health risks, effective for all calendar years beginning after 2013.

New law. Effective on its enactment date, the Appropriations Act suspends imposition of the fee for the 2017 calendar year, by making the fee effective for calendar years (1) beginning after December 31, 2013, and ending before January 1, 2017, and (2) beginning after December 31, 2017. (ACA §9010(j), as amended by the Appropriations Act §201DivP)

RIA observation: Reportedly, the moratorium is the legislative response to the perception that the insurance rates under ACA are too high, and that this fee is playing a role in the high rates.