The health care reform reconciliation bill makes a number of adjustments in the excise taxes on so-called “Cadillac” insurance plans and medical device makers, along with Medicare taxes and the fees imposed on pharmaceutical companies.

Among the changes in the reconciliation bill unveiled Thursday by the House are changes in the threshold for the excise tax on high-cost plans. The Senate version of the bill would levy a 40 percent tax on employer-sponsored health insurance policies of over $8,500 per year for individuals and $23,000 for families starting in 2013. However, in the reconciliation bill, the timing has been pushed back to 2018, and the threshold has been increased from $8,500 to $10,200 for individuals and from $23,000 to $27,500 for families. Those amounts would be multiplied by a “health cost adjustment percentage (determined by only taking into account coverage other than self-only coverage).”

The health cost adjustment percentage would be equal to “100 percent plus the excess (if any) of the percentage by which the per-employee cost for providing coverage under the Blue Cross/Blue Shield standard benefit option under the Federal Employees Health Benefits Plan for plan year 2018 (determined by using the benefit package for such coverage in 2010) exceeds such cost for plan year 2010, over 55 percent.”

“Relative to H.R. 3590, the reconciliation proposal would make a number of changes that
would affect its longer-term impact on the budget. In particular, it would increase the
subsidies offered in the new insurance exchanges and would reduce the impact of an
excise tax on health insurance plans with premiums above certain thresholds,” wrote Congressional Budget Office Director Douglas W. Elmendorf in a report on the budgetary impact of the reconciliation bill.

There is also a 3.8 percent tax on unearned income, including dividends and interest, for individuals making over $200,000 per year, or couples making over $250,000 a year.

For Medicare recipients, there is a tax of 3.8 percent for individuals of the lesser of net investment income for the taxable year, or the excess (if any) of the modified adjusted gross income for the taxable year, over the threshold amount. In the case of an estate or trust, the reconciliation bill would impose a tax of 3.8 percent of the lesser of the undistributed net investment income for the taxable year, or the excess (if any) of the adjusted gross income for the taxable year, over the dollar amount at which the highest tax bracket begins for the taxable year. The threshold amount for the tax is $250,000 for joint returns or $200,000 for individuals.

The reconciliation bill also delays the elimination of the deduction for expenses allocable to the Medicare Part D subsidy from 2010 to 2012. However, the reconciliation bill includes an additional $16 billion in cuts on Medicare Advantage plans on top of the $116 billion in cuts in the earlier version.

For medical device makers and importers, the excise tax is 2.9 percent of the price of any taxable device sold instead of a 2.5 percent tax. Eyeglasses, contact lenses, and hearing aids have been excluded from the definition of medical devices.

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