On December 20, 2019, President Trump signed the Consolidated Appropriations Act, 2020, repealing the Affordable Care Act’s (ACA) Cadillac Tax.
The U.S. Senate voted 71-23 on December 19, 2019, to approve the spending bill that included a repeal of the ACA’s excise tax on high-cost, employer-sponsored healthcare plans, also known as the “Cadillac Tax.” The House of Representatives approved the bill, H.R.1865, in a 297-120 vote earlier that week.
The 40% levy on high-cost employer health insurance, which was delayed twice, was last scheduled to go into effect in 2022. The tax was part of the 2010 Affordable Care Act.
The Cadillac Tax was set to be a 40% excise tax originally scheduled to take effect in 2018 to reduce health care usage and costs by encouraging employers to offer plans that are cost-effective, and engage employees in sharing in the cost of care.
The 40% tax was to be on the cost that exceeds a threshold of the total premiums paid by both employers and employees, plus:
- Employer and employee contributions to Health Care FSA, HRA and HSA
- The cost of Employee Assistance Plans with counselling benefits, onsite medical clinics and wellness programs
- Retiree coverage
- Hospital indemnity or other fixed indemnity insurance
- Federal / State / Local government-sponsored plans for its employees
- Coverage for a specified disease or illness
- Multi-employer plans
These thresholds (originally set for $10,200 for single coverage and $27,500 for family coverage in 2018), were to be updated for 2022 when final regulations were to be issued, and then indexed for inflation in future years. However, given the repeal of the Cadillac Tax, the updated thresholds will never be known.
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