When President Obama signed the new Consolidated Appropriations Act of 2016 into law in late December, he delayed both the Cadillac and Medical Device taxes by two years, from 2018 to 2020. The legislation also provided for the deductibility of the Cadillac Tax, which is an excise tax of 40% on the “excess benefit” of high cost employer-sponsored coverage, regardless of whether the health plan is fully insured or self-funded.
The cost thresholds associated with “high cost” coverage were initially indexed annually from a base value of $10,200 for individual coverage and $27,500 for other than self-only coverage, adjusted to reflect the age and gender composition of the employee population. The Cadillac Tax was originally intended to take effect in 2013, but in 2010, was postponed from 2013 to 2018. The Medical Device tax was originally projected to raise $29 billion over 10 years to help pay for Obamacare. While the delays were welcome news to employers and medical device makers alike, most are still hoping for outright repeals.