The U.S. House of Representatives voted on July 17 to abolish the so-called "Cadillac tax" on employer-sponsored high-value health plans, set to take effect in 2022. If the Senate passes the measure and the president signs it into law, the threat employers have faced from the tax would disappear.
The Cadillac tax, part of the Affordable Care Act (ACA) passed in 2010, is a 40 percent excise tax on the cost of employer health plans in excess of annual cost thresholds. It was intended to help generate tax revenue to help fund the ACA's subsidies for marketplace plans.
The tax, originally intended to take effect in 2018, was delayed twice by Congress and is now scheduled to go into effect in 2022. It is calculated based on: the costs of plan premiums (whether employer- or employee-paid and whether the plan is fully insured or self-funded); employer contributions and employee-elected payroll deductions to health savings accounts and flexible spending accounts; employer contributions to health reimbursement arrangements; the cost of group wellness programs; the value of coverage in onsite medical clinics; and certain other health benefits. As currently projected: If the average plan cost to cover employees and dependents is more than $11,200 for individual coverage and $30,150 for family coverage, employers would pay the tax on plan costs for each covered person above these threshold amounts.
"The House action to repeal the Cadillac tax is welcome news for both employers and employees," said Brian Marcotte, president and CEO of the National Business Group on Health. "Any tax that raises the cost of health benefits will harm the millions of working Americans and their families who rely on and value employer-sponsored health coverage.”
The Cadillac tax also has supporters. The tax "has a strong policy rationale: It will help slow health care cost growth," wrote Paul N. Van de Water, a senior fellow at the nonprofit Center for Budget and Policy Priorities, which advocates for sound fiscal policy.
Excerpt from SHRM Article dated 7-17-19 by Stephen Miller, CEBS