December 17,2015

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Aaron Fobes, Julia Lawless (202) 224-4515

Slashing Obamacare’s Devastating Taxes

Congress Poised to Suspend Health Law’s Reckless Taxes

Obamacare’s thoughtless taxes were devised behind closed doors, without regard for their negative consequences, in an effort to cobble together enough money to pay for the President’s health law.

From taxing the very industry that produces life-saving medical devices to levying a new tax tacked to health insurance plans, Obamacare’s authors taxed the healthcare system left and right to pay for their massive new federal healthcare program.

Now, as American families, businesses and workers experience the taxes’ negative consequences firsthand, there is finally bipartisan support to provide much needed relief.

The PATH Act and the Omnibus bill significantly reduce the negative tax impact of Obamacare and continues the promise of Republicans to use every opportunity to chip away at the healthcare law while working towards full repeal.

Here’s a look at how the bills deal a blow to some of Obamacare’s most reckless taxes:

Suspends Medical Device Tax until 2018:

Under the Patient Protection and Affordable Care Act (PPACA), manufacturers of medical devices are required to pay a 2.3 percent excise tax on products ranging from surgical tools to bed pans. The tax took effect in January 2013.  The tax raises the effective tax rate for manufacturers, thereby reducing resources to create and retain jobs and invest in new product development.  A survey by the Advanced Medical Technology Association (AdvaMed) found that the tax impacted approximately 39,000 American jobs since implementation, either through layoffs or forgone jobs that would have been created.  That same survey found that over 70 percent of respondents would reinstate forgone job growth if the medical device excise tax is repealed, and 85 percent would reinstate forgone R&D projects. The PATH Act provides for a two-year suspension of the medical device tax.  The tax would not apply to sales during calendar years 2016 and 2017.

Delays Cadillac Tax until 2020:

Obamacare imposes a 40 percent excise tax placed on high cost employer-sponsored health benefits (“Cadillac” tax).  Although paid by insurers and employers, this new, expensive tax will directly hit American workers by increasing the cost of employer sponsored health care.  The Omnibus bill delays the imposition of the “Cadillac” tax for two years.  The tax first would be effective in 2020, rather than in 2018 as under current law.  Former CBO Director Doug Holtz-Eakin writes, “For two years, employers will not suffer the complexities of the Internal Revenue Service rulemaking to implement the Cadillac tax, employees will not endure higher insurance costs, and conservatives will have a window to develop alternative, sensible cost-control mechanisms.”

Suspends Health Insurance Tax (HIT) for 2017:

PPACA instituted a new annual tax on health insurance premiums. According to the Congressional Budget Office (CBO), the tax will be “largely passed through to consumers in the form of higher premiums.” The actuarial firm Oliver Wyman estimates individuals purchasing coverage on their own will pay $170 more in premiums and small businesses will pay $530 more for each family they cover.  The fee is assessed only on licensed insurance carriers and not self-insured health plans distorting the economic decision between self-funding and plan participation and creating an unlevel playing field.  The impact is particularly significant for small businesses and farmers – the vast majority of which purchase coverage in the fully insured marketplace. The National Federation of Independent Business found that this tax will force the private sector to eliminate between 152,000 and 286,000 private sector jobs between now and 2023.  The Omnibus bill provides for a one-year suspension of the annual excise tax imposed on health insurance providers.  The tax would not apply for calendar year 2017.