President Obama recently signed the Consolidated Appropriations Act of 2016, providing a two-year delay of the Affordable Care Act's excise tax on expensive employer health plans commonly known as the "Cadillac Tax".
The purpose of the Cadillac Tax is to rein in high-priced health insurance policies offered by employers. The tax would impose a 40% tax on the portion of benefits exceeding certain price thresholds. Those thresholds are plans that cost more than $10,200 (for self-only coverage) and $27,500 (for family coverage). So for instance, if a family plan costs $30,000, the employer would be taxed on the excess amount of $2,500 which equates to $1,000.
Prior to the delay, the 40% tax was set to take effect in 2018. As a result of the new law, this tax will not be effective until 2020.
This act also put a freeze on the medical device excise tax. Beginning January 1, 2013, a 2.3% medical device excise tax was imposed on manufactures and importers on sales of certain medical devices. Under the final regulations, a “taxable medical device” is a device that is listed as a device with the FDA under section 510(j) of the Federal Food, Drug and Cosmetic Act, and 21 CFR part 807, pursuant to FDA requirements. This tax normally does not apply to individual consumers.
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