Republicans may have successfully repealed the most hated part of Obamacare—the individual mandate—but they are entering the new year with a handful of health care taxes intact that are targets of industry stakeholders.
In the final month before the holiday recess, House Ways and Means Committee Republicans introduced bills to delay these taxes. But in the end-of-year rush, the bills that would suspend Affordable Care Act taxes on medical devices, health insurance companies, high-cost plans and the employer mandate were shoved into the new year along with other health care goals.
The 2.3 percent tax on the sale of medical devices has been strongly opposed by the industry, notably the Advanced Medical Technology Association, or AdvaMed, lobbying group. Lawmakers on both sides of the aisle have also been harshly critical of the excise tax on items such as catheters, pacemakers, and artificial joints.
The tax was imposed in 2013 to help fund Obamacare, but was suspended at the end of 2015. The tax went back into effect Monday after the two-year hiatus since Congress did not extend it before the end of 2017.
AdvaMed argues that the tax would suck up dollars that could otherwise go towards research and development. “What we are saying is you are directly impacting innovation by having this 2.3 percent tax on the books,” said Greg Crist, executive vice president of public affairs.
AdvaMed President and CEO Scott Whitaker described the industry as frustrated with Congress’s inability to abolish the tax.
“But through that frustration, we are hopeful that Congress comes through on its word to end the device tax this month, before the first payments are sent to the IRS,” said Whitaker. “A deadline looms; no one wanted this tax to return. Congress can make sure that its impact isn’t felt if it acts in this short window.”
Insurers are also keeping an eye on the Obamacare health insurance tax. Legislation promoted by the Ways and Means Committee would delay the tax in 2018 for insurers who provide customers rebates, and then defer the tax in 2019 for all insurers. America’s Health Insurance Plans has argued that families in the small-employer market could see their premiums go up by $7,000 over the next 10 years because of the tax.
Delaying the tax could provide a little more wiggle room to an industry facing uncertainty as other Obamacare changes—such as the repeal of the individual mandate—take effect.
“It would give insurers some breathing room around profitability,” said Larry Levitt, senior vice president for health reform at the Kaiser Family Foundation. He added that 2017 was “a very good year for insurers, but 2018 could be dicey with enrollment likely dropping and, you know, potential fall out with the individual mandate being repealed.”
House Republicans also aim to delay the employer mandate for one year and retroactively suspend it for three years. Experts have said generally this mandate was not as strong or consequential as the individual mandate.
In November, the IRS announced that it would begin enforcing the mandate penalties for the 2015 tax year. It requires employers with 50 or more full-time employees to offer minimum essential coverage that is affordable, or pay the penalty.
But experts in the past said the mandate is imperfect. An analysis by the Urban Institute in 2014 found that the employer mandate is not critical to expanding coverage under the ACA.
The Urban Institute had estimated that eliminating the mandate would cost the government about $46 billion, while the Congressional Budget Office in 2017 estimated that the cost would be $171 billion over 10 years if the mandate were repealed as part of the American Health Care Act.
The mandate’s delay is paired with a one-year delay of the Cadillac tax—a 40 percent excise tax on employer plans exceeding $10,200 in premiums for individuals and $27,500 for families.
Repealing the tax has bipartisan support on Capitol Hill, and several business groups have been pressing for the tax to be scrapped as part of the Republicans’ Obamacare repeal-and-replace efforts.
The ERISA Industry Committee, an advocacy group for large employers, argues that implementing the tax would affect 178 million Americans and would specifically put women, seniors, low-income families and the disabled at a dangerous disadvantage.
“Now it’s time for House leadership to bring this legislation to the floor for a vote,” said James Gelfand, senior vice president of health policy, in a recent statement. “While the final implementation date of the Cadillac tax has been pushed to 2020, employers have already started preparing and scaling back on their benefits, so as not to trigger the tax when it goes into effect.”