A set of delays on Obamacare-related taxes in the new federal spending bill will give corporate earnings a modest boost but are unlikely to undo the law or produce significant changes in the health-care industry.
Medical-device companies such as Medtronic Plc, health insurers like UnitedHealth Group Inc., and big employers across the U.S. have been preparing for years for a slate of new taxes under the Affordable Care Act. They'll find it easier just to collect extra profit from a tax cut rather than undo those changes, such as job reductions and revamped health benefit plans.
The legislation pauses or delays three sources of funding for Obamacare: a 2.3% excise tax on medical devices that started in 2013; a 40% levy on high-cost health insurance plans, known as the Cadillac tax, that was supposed to start in 2018; and health insurer fees that have already begun.
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The changes will cost more than $30 billion, according to the Joint Committee on Taxation, which evaluated the proposals over a 10-year period.
The House of Representatives is expected to vote on the legislation on Thursday, while the Senate aims to vote Friday.
Terry Haines, a policy analyst at Evercore ISI, said the suspension of the medical device excise tax and a two-year delay for the "Cadillac tax," an added fee for employers who offer their workers high-cost health insurance plans, were a "near certainty." President Barack Obama is expected to sign the bill.
Republicans are attacking funding for expanded health insurance after failing to get the Affordable Care Act overturned by the U.S. Supreme Court or shot down broadly in Congress. But some Democrats have also favored repealing these taxes. The Cadillac tax, for one, has faced opposition from labor unions whose members have extensive insurance coverage.
The $30 billion in foregone revenues is just a small portion of the revenue and spending tied to the 2010 health-care overhaul, said Jared Bernstein, an economist at the Center on Budget and Policy Priorities who formerly worked for Vice President Joe Biden.
NO KILL
“The funding loss isn't big enough to fundamentally undermine health reform,” he said. There are still “a significant number of policymakers who are trying to kill it at every turn. They haven't been able to do that legislatively so they're going to try and cut off its revenue.”
The Affordable Care Act has helped bring health coverage to about 17.6 million previously uninsured people. The 2010 law gave federal funds to states that expanded eligibility for Medicaid and also provided subsidies for individuals to buy health insurance. The Centers for Medicare and Medicaid Services said today that about 4.2 million people have picked 2016 coverage on the federal insurance marketplace created by the law.
With the Cadillac tax looming, employers had been under pressure to hold down their health-insurance costs, in part by sharing more of the expenses with workers — raising deductibles and copays — and limiting some benefits. The average annual deductible for an individual in an employer health plan has climbed 67% since 2010, to $1,077 this year, according to the Kaiser Family Foundation.
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About a third of employers were at risk of paying the Cadillac tax in 2018 if they didn't adjust their health benefits, according to Mercer, the benefits consulting unit of Marsh & McLennan Cos. The Cadillac tax is assessed on health-insurance premiums over the limit of $10,200 for individuals or $27,500 for families.
But the Cadillac tax is just one of many rising health-care costs employers are still contending with, meaning the trend toward cost-sharing with employees is likely to continue.
