It’s official. President Obama has signed the Omnibus Bill, funding the federal government through the end of the 2016 fiscal year. And while the bill made permanent some tax extenders, it delayed three key Obamacare taxes, forcing the president to make his biggest concessions yet since the ACA was passed.
Most significantly, the new legislation pushes back, until 2020, the “Cadillac” tax on employer healthcare benefits -- Obamacare’s cornerstone that aims to contain healthcare costs. The Cadillac tax is a 40% excise tax on the total monthly cost of employer-sponsored health coverage above a certain dollar amount ($10,200 for single coverage, $27,500 for family coverage, indexed for inflation). That 40% tax is imposed on the “coverage provider” -- the health insurance carrier in the case of an insured group health plan, the employer under an HSA, or “the person that administers the plan benefits” in all other cases. By itself, the delay of the Cadillac tax takes a $20 billion bite out of Obamacare’s revenue stream, according to the nonpartisan Joint Committee on Taxation, and undermines a key argument for the cost-saving measures of the law.
The Omnibus Bill also placed a moratorium on two additional ACA taxes. First, the ACA’s 2.3% tax on the sale of taxable medical devices was frozen for 2016 and 2017. Second, the ACA’s annual, non-deductible fee on health insurance providers, which is treated as an excise tax and was first due in 2014, was frozen for 2017. These delays represent an additional $15 billion cut out of Obamacare’s revenue stream, according to congressional budget scorekeepers.
These changes are a win for critics of Obamacare, as they represent a major blow to economic underpinnings of the law. Republicans particularly have more ammunition for future battles over the ACA as these taxes, the Cadillac tax most definitively, aimed to ensure that Obamacare reigned in health spending and did not blow a hole in the deficit. That argument can no longer be made and will undoubtedly become a major talking point in the upcoming presidential election. Making matters worse for Obamacare supporters is that every major presidential candidate, Democrats included, supports a total repeal of the Cadillac tax. If that disappears completely, and healthcare costs rise rapidly as expected, support for the ACA will likely plummet.
The ACA is ever-changing and will likely look very different after 2016 when the president leaves office. Be prepared to adjust your sails as decisions are made that impact you and your business.
