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LARGE GROUP UPDATE
Congress delays Cadillac tax and suspends HIT tax
On Dec. 18, 2015, President Obama signed into law major legislation (H.R. 2029) that contains both the "Consolidated Appropriations Act of 2016" and the "Protecting Americans from Tax Hikes Act of 2015." The legislation was approved with strong bipartisan support in both the House of Representatives and the U.S. Senate.
The new law includes several important health insurance-related provisions that are important to our customers:
- First, it suspends the assessment of the Health Insurance Tax (HIT tax) for one year (2017). The HIT tax is a $142 billion tax on health insurance and is part of the Affordable Care Act (ACA). The tax started at $8.4 billion in 2014, increased by 40% in 2015, and will nearly double over the course of four years to $14.3 billion in 2018. The tax is assessed on insurers based on their market share of fully insured business, and results in higher premiums for consumers. Highmark has long advocated for the repeal of this tax, which drives up the cost of coverage for millions of Americans. While a one-year suspension is not a repeal, it is welcome relief and a temporary victory for consumers.
- Second, it delays the implementation of the excise tax on high-cost coverage (a.k.a. the "Cadillac tax") for two years. The Cadillac tax, another provision of the ACA, is a 40% excise tax on certain high-cost, employer-sponsored health coverage (including self-insured coverage) that was supposed to become effective in 2018. The new law delays the implementation of this tax until 2020 and makes the excise tax deductible. Highmark has been educating legislators on the financial impact this tax would have on our employer clients and we are pleased with the outcome to delay its implementation.
With the passage of this legislation, Congress has completed its business for the year.
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