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Congress’ Spending Bill Delays Certain ACA Taxes and Extends CHIP

On Behalf of | Jan 31, 2018 |

On January 22, 2018, President Trump signed into law a short-term spending bill (i.e., a “continuing resolution”) that reopened and refunded the federal government for three weeks (i.e., until February 8, 2018).  The legislation includes a delay of three taxes under the Affordable Care Act (“ACA”) and a six-year extension of the Children’s Health Insurance Program (“CHIP”). 

Highlights from the legislation regarding the ACA and CHIP include:

ACA Tax Delays

  • Cadillac Tax: Implementation of the Cadillac Tax is delayed for two additional years, with a new effective date of January 1, 2022.  The Cadillac Tax imposes a 40 percent excise tax on group health plans that have a value in excess of certain thresholds.  Originally enacted with a 2018 effective date, the thresholds were (initially) $10,200 for self-only and $27,500 for family coverage.  The tax has since been delayed twice, and the thresholds will be updated prior to the new effective date.
  • Health Insurance Industry Fee:  The Health Insurance Industry Fee (also known as the Health Insurer Tax) has been suspended for 2019.  This fee only affects insured health plans and is paid by insurers.  The fee is part of the insurance premium and, therefore, tax deductible for employers. 
  • Medical Device Tax:  The Medical Device Tax is suspended for 2018 and 2019.  This delays the excise tax (i.e., 2.3 percent) on the sale of certain medical devices by the manufacturer or importer of the device.

CHIP Extension

The six-year funding extension provides stable funding for states to continue their CHIP coverage. In sum, it:

  • Provides federal funding for CHIP for six years (i.e., from 2018 through 2023).
  • Continues the 23 percentage point enhanced federal match rate for CHIP that was established by the ACA, but reduces the federal match rate to the regular CHIP rate over time.
  • Extends the requirement for states to maintain for coverage for children from 2019 through 2023.  After October 1, 2019, the requirement is limited to children in families with incomes at or below 300% Federal Poverty Level.