CSAC Bulletin Article

CHIP Reauthorized, Cadillac Tax Delayed in Federal Resolution

January 25, 2018

Although the Continuing Resolution (CR) approved this week by Congress did not include a DACA fix, the bill did contain several major policy riders that ordinarily would not be found in a spending package.  The legislation provides a six-year reauthorization of the Children’s Health Insurance Program (CHIP). And it delays the so-called ”Cadillac Tax” associated with the Affordable Care Act.

Notably, and consistent with the long-term CHIP reauthorization measures that had been pending in the House and Senate, the CR phases down the Affordable Care Act’s (ACA) enhanced federal matching rate for CHIP coverage.  Specifically, and while HR 195 retains the ACA’s 88 percent federal contribution for California through fiscal year 2019, the rate will be reduced to 76.5 percent in fiscal year 2020.  Beginning in fiscal year 2021, the rate will return to its pre-ACA level of 65 percent.

ACA Tax on High-Cost Health Insurance Plans

The final CR temporarily delays the ACA’s 40 percent excise tax on high-cost health insurance plans.  The so-called “Cadillac Tax,” which was slated to take effect in 2020, will now be postponed until 2022.  Many public employers, including counties, offer high-value health plans that will be impacted by the tax.  With the excise tax costs expected to rise over the years as health care expenses increase, the burden on county budgets could be significant.

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