Congress poised to repeal HIT, medical device and 'Cadillac' ACA taxes as part of spending deal

Capitol building in Washington
Congress has added repeals of several Affordable Care Act taxes, including a tax on health insurers, to a major must-pass spending package, several outlets are reporting. (rarrarorro/iStock/Getty Images Plus/Getty Images)

Congress is expected to repeal the Affordable Care Act’s (ACA's) health insurance, medical device and “Cadillac” taxes as part of a must-pass spending agreement set to be passed this week.

The spending package, the text of which was released Monday, is expected to be voted on in the House Tuesday and will get rid of taxes meant to fund the ACA but that have garnered bipartisan opposition. The package must be passed to avoid a government shutdown at midnight Friday.

The repeals would represent a major windfall for both providers and payers that have lobbied fervently against the taxes since the ACA was passed in 2010. None of the taxes are in effect now, but the health insurance and device taxes were expected to resume next year.

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The Cadillac tax is a 40% excise levy on high-cost health plans that was meant to curb high employer plan spending. However, the tax generated bipartisan condemnation as Democrats got flak from unions about the potential impact.

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While the taxes for insurers and devices have gone into effect and been delayed several times, the Cadillac tax has never been implemented and is delayed until 2022. The House passed a bill earlier this year by a massive 419-6 margin to repeal the tax. 

Insurers have fought hard to get another delay at the very least to the $16 billion health insurance tax, which would go into effect Jan. 1.

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Advocacy groups pushing for a delay were ecstatic with the full repeal. 

"Lawmakers’ vote to repeal the HIT will offer certainty that lays the groundwork for investments in innovative care and benefit design to address the needs of today’s seniors in Medicare Advantage," said Allyson Schwartz, president and CEO of the Better Medicare Alliance. 

Business groups were also pleased about the long-reviled Cadillac tax.

"Congress should focus on the drivers of medical inflation and unnecessary costs rather than taxing employees and employers," said Brian Marcotte, president and CEO of the National Business Group on Health.

The legislation also has a provision that would prohibit any attempts to hinder "silver loading," a practice used by ACA insurers to recoup cost-sharing reduction payments. ACA insurers load premium hikes to recoup the payments onto silver-tier plans to boost the level of ACA tax credits.