Today, Congress finally passed a $1.8 trillion package combining their two “must pass” end of year bills: funding the government through next October and extending expiring tax breaks. The package combines a $1.1 trillion omnibus spending bill with $680 billion in tax breaks, many of which were due to expire at the end of the year but will now be made permanent. It includes provisions to delay taxes that NAHU has continuously advocated that Congress repeal. The legislation will delay the Cadillac/excise tax by two years, which will help give Congress additional time to consider legislation that would fully repeal the tax, and also includes a one-year delay of the health insurance tax (HIT). The final package was broken into two pieces in the House, with lawmakers voting on the tax-extenders bill Thursday and the omnibus spending bill today, before being combined into a single bill that the Senate also passed today. The deal came following another stop-gap funding bill that was needed to prevent a government shutdown on Wednesday. The White House has indicated that once passed, President Obama will sign the final agreement into law.
The delay of the Cadillac/excise tax is effective for 2018 and 2019, meaning that without further legislative adjustment or repeal, the tax will now be scheduled to take effect beginning in January 2020. Language in the package also permanently makes the tax deductible to employers and calls for a study by the comptroller on appropriate age and gender adjustments in consultation with the National Association of Insurance Commissioners (NAIC). The delay of the HIT is effectively a one-year moratorium of the fee as the tax went into effect last year and health plans, and in turn, consumers have already been paying the tax. The delay will be effective for 2017, which will result in lower premiums just in time for the November presidential election. A third health-reform tax, a 2.3% tax on medical devices that began in January 2013, will similarly be suspended until December 31, 2017. The repeal of the three major taxes: Cadillac/excise, HIT, and the medical device tax amount to a loss of $35 billion in revenue to the federal government. Based on estimates made by the Congressional Budget Office (the methodology of which NAHU disputes), permanent repeal of all three of these taxes would amount to $250 billion over a 10-year span.
NAHU supports the delay of the Cadillac/excise tax as a short-term measure, but we remain fully committed to a complete repeal of the tax given its projected widespread impact on employer-provided insurance coverage. Inclusion of these delays can be an important first step on to achieve complete repeal and in the short term, we hope the delays will bring some relief to your clients. Over the past several weeks, NAHU aggressively lobbied lawmakers to fully repeal the tax in one of the end-of-year packages. Our grassroots efforts included sending more than 8,700 messages to Congress from NAHU members and nearly 400 messages sent from your employer clients calling on Congress to repeal the tax in an end-of-year deal. We want to express our gratitude for everyone who took up our call to action and contacted their legislators asking for the tax to be repealed in one of the year-end packages. We will continue to make our push to elected officials urging them to fully repeal the tax in the New Year.
The delays in the Cadillac/excise tax and the HIT culminate a successful year for NAHU’s lobbying efforts. While the delays fall short of full repeal, they are encouraging of the possibility for the year ahead. In late September, the House passed H.R. 1624 to give states the ability to set their own small-group size definitions, which was followed by the Senate and ultimately signed into law by President on October 7. We were also successful in getting a repeal of the auto-enrollment provisions for large employers as well as a reduction in the proposed Medicare Part B premiums and deductibles for many beneficiaries in an agreement signed into law last month. Looking ahead to 2016, our top legislative priority remains removing broker commissions from the ACA’s Medical Loss Ratio, in addition to fully repealing the Cadillac/excise and health insurance taxes, restoring the 40-hour workweek and the Medicare open enrollment period, easing employer reporting requirements, and expanding the ACA’s small business tax credit.
Other than the delays to the Cadillac/excise tax and HIT, the pending legislative package also includes several other health-related items. It includes language that requires state-based marketplaces to not use federal funding for operational expenses, which was an original requirement under the law beginning in January of this year. The Administration has walked around this requirement for some states by allowing them to keep spending grants on development expenses under no cost extensions—an issue which came up during a hearing last week. The deal also includes a provision that further restricts the ACA’s risk corridor program, which was curtailed in last year’s CRomnibus. NAHU opposes any efforts to restrict the law’s three-R programs (Reinsurance, Risk Adjustment, and Risk Corridors), as they help ensure stability in the marketplace. Finally, it also effectively defunds the Independent Payment Advisory Board (IPAB) for 2016. The IPAB is a panel instructed to study ways to curtail Medicare spending should certain thresholds be met, however as spending has not reached those levels it has yet to be convened, nor had it been projected to in 2016. NAHU will send an alert to all members once President Obama signs this end of year deal.