As Employers Try To Avoid The Cadillac Tax, Treasury And The IRS Need To Act

When Congress passed the ACA, the law’s so-called Cadillac tax was touted as targeting lavish health plans, supposedly rare but costly. However, the economic reality today is that the excise tax will hurt everyday workers and the health benefits they have come to rely on. Employers are actively trying to develop ways to avoid the non-deductible 40 percent tax on employer-sponsored plans valued over $10,200 for individual coverage and $27,500 for family coverage, set to take effect in 2018. But in the process, those employers have begun to impose higher health costs on workers. The time for policymakers and regulators to act is now. The longer they wait the more uncertainty there will be in the marketplace and worker benefits will be harmed. Legislative Background When the excise tax was passed by Congress in 2010, the policy rationale was two-fold: First, the tax was designed to slow the rising cost of health care and put pressure on employers to restructure employee health plans by increasing cost sharing on the part of employees. This would encourage employees to consume less health care, resulting in lower medical spending in the long-term. In order to avoid paying the 40 percent tax, employers have begun to redesign the health benefits offered to employees. Second, the tax was intended to raise significant revenue to pay for other key components of the ACA, including subsidies to help low- and middle-income families afford coverage through the health insurance marketpla...
Source: Health Affairs Blog - Category: Health Management Authors: Tags: Following the ACA Insurance and Coverage Cadillac tax Employer-Sponsored Insurance Excise tax health care IRS Source Type: blogs