Benefits were the real winners in the stopgap government funding Bill H.R. 195. On January 22, 2018, President Trump signed into law a Continuing Resolution (CR) that included major healthcare priorities. The bill that was passed and signed into law addresses many healthcare issues. One, in particular, that WageWorks has been working on as one of our top advocacy priorities.
Cadillac Tax
The so-called “Cadillac Tax” will levy a 40 percent tax on the value of employer-sponsored insurance that exceeds a certain threshold. Unfortunately, the calculation of the threshold includes employee contributions to Health Flexible Spending Accounts (FSAs) and Health Savings Accounts (HSAs).
It also hands over the onerous task to employers of calculating overages, on a per-employee basis, for all benefits offered, and then allocating and collecting the taxes from their various benefits providers and administrators.
Originally slated to begin operation in 2018, previous legislation delayed this tax until 2020. H.R. 195 provides relief for an additional two years, delaying implementation of this excise tax until 2022.
WageWorks applauds the delay afforded to employers and employees alike. Nevertheless, despite the four-year respite, WageWorks continues to lobby for full and permanent repeal of this burdensome and expensive provision—or at the very least an exclusion from the threshold of employee contributions to health FSAs and HSAs.
Children’s Health Insurance Plans (CHIP)
The CHIP program helps families with children who are caught between Medicaid and unaffordable private insurance. This much-needed safety net has been funded for the next six years, providing certainty to state CHIP programs and peace of mind for CHIP families. Congress then added another four years of funding in a February budget deal.
A rescissions bill that targeted the CHIP funding was rejected by the Senate earlier this year.
Health Insurance Tax
The tax levied on health insurance is paid by insurance providers and drove up monthly premiums while making health insurance more expensive for everyone. The health insurance tax will not be applicable for 2019. It is set to reappear in 2020.
Medical Device Tax
The manufacturers of medical devices, such as pacemakers, also paid a tax on their products. This tax drives up the cost of medical devices and perhaps hinders development of new products. Again, as with the Cadillac and health insurance tax, this 2.3 percent tax on medical devices was delayed until 2020 but not eliminated.
This summer the House passed a permanent repeal of the medical device tax and the Senate is expected to take up the bill before the end of the year. The Senate’s August recess was shortened—which gives them more time with their backlog of appropriations bills.
The information contained in this article is not intended to be legal, accounting, or other professional advice. We assume no liability whatsoever in connection with its use, nor are these comments directed to specific situations.
