Recent ACA discussion has turned to the so-called "Cadillac Tax" (scheduled to take effect in 2018), which is a 40% non-deductible excise tax on employer-sponsored health coverage that provides high-cost benefits. It's expected to affect over 25% of employers as the regulation is currently written. Cigna provides the following PDF on their website with more details on how it would work, including IRS requirements:
The Washington Post's Carolyn Johnson wrote in the Wonkbook today:
The next fight over the Affordable Care Act may center on one of its most powerful provisions to contain health care costs — the "Cadillac tax" on the most generous health insurance plans.
A new analysis released this week by the Kaiser Family Foundation estimated that just over a quarter of employers that offer health plans would pay the 40 percent tax in 2018 on at least one plan if they don't make changes. The National Business Group on Health, a nonprofit association of large employers, found that half of its members reported that at least one of their health plans would trigger the tax in 2018. Both groups predicted that the proportion of employers affected would go up significantly over time.
That means many employers are scrambling to find ways to avoid the tax. Ultimately, that will probably mean a combination of paring benefits and shifting cost to employees through high deductible plans, capping or eliminating flexible savings accounts, and offering less generous plans that, for example, limit access to a narrower networks of doctors and hospitals.
"The 'Cadillac tax' will have a very powerful effect on health care costs, and that certainly a good thing. But the way the tax helps to keep health costs down is primarily by shifting it to workers," said Larry Levitt, a senior vice president at the Kaiser Family Foundation who did the analysis. "While it certainly sounds good to control heath care costs, the way it is likely to happen won’t feel very good to consumers."
The opposition to the tax comes from a motley collection of unlikely allies, beyond the usual cast of anti-tax Republicans. In late July, The Alliance to Fight the 40 launched a concerted campaign against the tax, backed by a coalition that puts the insurer Cigna, the labor group Unite Here, the utility Eversource Energy, and school districts on the same side. The Hill reported that House Republicans will likely put repealing the tax on the fall agenda. Even Hillary Rodham Clinton is concerned.
The Henry J. Kaiser Family Foundation has excellent resources and research on the "Cadillac Tax" and many other topics related to health care reform:
Also related to the Cadillac Tax, BenefitsPro.com published an article on how the regulation might affect FSA's (flexible spending accounts):
As always, we welcome your thoughts and comments below.