The temporary freezes on three Affordable Care Act taxes approved by Congress last week won't have an immediate impact on the law's coverage expansions, but could damage its financing if the taxes are indefinitely suspended or repealed, experts say.
Congress approved the tax delays as part of a sweeping package of tax cuts worth more than $600 billion. Lawmakers also approved a $1.15 trillion spending package.
The tax legislation includes delaying for two years implementation of the ACA's so-called Cadillac plan tax, which was scheduled to go into effect in 2018. It also freezes for two years the law's 2.3% excise tax on medical devices that began in 2013, a big win for the device industry that's expected to boost profits. And it delays the tax on health insurance premiums by one year, which could lower premiums.
Those changes are projected to cost more than $30 billion over two years, according to Congress' Joint Committee on Taxation. The White House said the president will sign the tax and spending bills.
The package includes a $2 billion funding increase for the National Institutes of Health, and a continued requirement that the ACA's risk-corridor program, which compensates health insurers that sign up sicker-than-expected populations on the insurance exchanges, be deficit-neutral. That provision has been blamed for financial losses among many insurers selling exchange plans.
Not included in the legislation was a provision hospitals sought to exempt those currently building outpatient facilities from recent Medicare site-neutral payment rules.
The delay of the three ACA taxes was the culmination of several years of intense lobbying by labor unions, employers, medical-device makers, and health insurers to roll back those levies. It resulted from a deal between Democrats, who support the ACA but want to please their labor union allies who hate the Cadillac tax, and Republicans who oppose the entire ACA and need Democratic support to roll back other financing mechanisms as well. Some observers see the deal as a shrewd way for House Speaker Paul Ryan to chip away at the law's foundations with the goal of eventual repeal.
Of the three delayed ACA taxes, there was the greatest concern about the Cadillac tax, because the Obama administration and many economists argued that it would help control healthcare spending.
It imposes a 40% levy on the value of employer-sponsored plans that exceed $10,200 for individuals and $27,500 for families. About a quarter of employer health plans would have been subject to the tax in its first year, increasing to 42% by 2028, according to the Kaiser Family Foundation.