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Cadillac Tax Postponed
The new 2018 "Cadillac tax" is on track to be postponed until 2020.
Cadillac Tax Postponement
The two year postponement of what has been dubbed the "Cadillac tax" because it applies to high priced insurance, is the most significant of three changes to the Affordable Care Act (ACA) taxes that are woven into a sprawling budget package on which the House and Senate are preparing to vote on.
The legislation would temporarily suspend both of the other taxes which already have begun. It would lift for two years a tax on medical devices, and create a one-year moratorium in 2017 on a tax levied on all private health insurance.
The Congressional Joint Committee on Taxation has estimated that the tax would bring in $2.2 billion in 2018 and $7.2 billion in 2019. Its revenue would balloon after that, totaling an estimated $91 billion by 2025.
The decision to postpone would cost the government an estimated $9 billion and have a symbolic effect as the first major change that lawmakers have made to the ACA.
What is the Cadillac Tax?
The Cadillac tax is the planned levy on high cost health benefit plans provided by employers to their employees. It imposes an excise tax of 40 percent on health plans whose value is more than $10,200 for individual coverage and $27,500 for a family (the tax only applies to the amounts that exceed the threshold).
According to a recent analysis by the Kaiser Family Foundation, about one in four employers can be expected to offer health plans in 2018 that are expensive enough to be affected by the Cadillac tax. After that, the tax's reach will expand quickly, because it is tied to the rate of inflation, and insurance premiums have been growing more rapidly than that rate--meaning that more and more plans will be ensnared as time goes on.
The analysis shows that 30 percent of employers will be affected by the tax by 2023 and 42 percent five years after that, if their health plans remain unchanged and health costs continue upward at the same pace.
Companies don't want to hit the threshold that triggers the tax, so they are starting now to pare back the value of benefit plans. For employees that means:
- Cap on health savings accounts
- Elimination of some covered services
- Higher deductibles
and other changes.
The main argument against the tax is that instead of mitigating the costs of health care, it will likely prompt employers to scale back or eliminate benefits altogether to offset the added cost-- a move that some analysts say may actually lead to the higher costs the tax seeks to prevent.
How IAA can Help
Insurance Administrator of America is here to help you create a plan that works for both you and your employees. While a postponement is great, the Cadillac tax is still going to be coming up in the future. IAA can help you find the right balance between business needs, employee needs and the tax.
If you have any questions or would like to learn how a self-funded health plan can help the life of your business please feel free to contact us.
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