While manufacturers are disappointed that the Senate effort to repeal key provisions of the Affordable Care Act (ACA) did not come to fruition by the September 30 budget reconciliation deadline, work will continue to address the employee benefits tax known as the “Cadillac” tax, the medical device tax, the health insurance tax (HIT) and other onerous aspects of the ACA. In fact, while the Graham-Cassidy proposal fully repealed the 2.3 percent excise tax on medical devices, it was silent on the HIT and the 40 percent excise tax on employee benefits.
The lack of action this month now means that the medical device tax and HIT will go into effect in 2018 if not delayed or fully repealed through another legislative vehicle. The “Cadillac” tax looms in 2020 following a short-term reprieve granted by Congress in 2015.
Sen. Cory Gardner (R-CO) this week introduced the Healthcare Tax Relief Act, legislation that seeks a one-year delay of the HIT. Joining Sen. Gardner as original cosponsors of the legislation are Sens. Jim Inhofe (R-OK), Tom Cotton (R-AR), Ron Johnson (R-WI), Rob Portman (R-OH), Jeff Flake (R-AZ), Roy Blunt (R-MO), John Barrasso (R-WY), Ted Cruz (R-TX), Dean Heller (R-NV) and Tim Scott (R-SC). Manufacturers appreciate these efforts to put a hold on a tax that only increases health care premiums on employees and families. The NAM also appreciates the efforts of Reps. Kristi Noem (R-SD) and Kyrsten Sinema (D-AZ), who sent a letter to House Speaker Paul Ryan and Ranking Member Nancy Pelosi urging the House to delay the HIT.
Regrettably, it’s not just the HIT. The medical device tax—another tax that discourages innovation, growth and job creation—is ready to go into effect next year. In 2015, a temporary suspension of the 2.3 percent excise tax on medical device manufacturers was enacted after 29,000 jobs were lost as a result of the misguided tax. However, that two-year relief runs out at the end of 2017, making full repeal of this tax critical to manufacturers of medical devices. At the beginning of the year, Sen. Orrin Hatch (R-UT) and Rep. Erik Paulsen (R-MN) both introduced bills (S. 108 and H.R. 184) to repeal the medical device tax. The NAM continues to work to build increased bipartisan support and further action on this important legislation.
It was unfortunate that the Senate did not pass major health care reform legislation this month, but manufacturers urge Congress not to abandon efforts. Both the House and Senate must advance opportunities to address the burdensome taxes associated with the ACA because the deadlines are around the corner and the clock is still ticking.