One of the last pieces of the Affordable Care Act (ACA) to be implemented, and perhaps one of the most controversial, is the 40 percent excise tax on high-cost health plans, often referred to as the “Cadillac Tax”.
The tax, which was originally intended to go into effect in 2018, has kept employers busy over the last few years, trying to predict its impact and looking for ways to reduce their liability.
Legislation passed at the end of 2015 included three provisions related to the tax that can be considered a win for employers. Specifically the changes:
- Added a two-year delay to the effective date of the tax moving it from 2018 to 2020. Not only does the delay give employers additional time to improve on the cost effectiveness of their coverage, but it is likely to allow for an increase in the minimum threshold amounts that are currently set in law at $10,200 for single coverage and $27,500 for family coverage.
- Made the tax permanently deductible as a business expense. The tax was initially a 40% non-deductible tax, but it can now be treated as a deductible business expense, which could significantly reduce the actual cost of the tax to employers.
- Called for a GAO study on the current industry age and gender adjustment standards. Further adjustments could be favorable to employers, especially those with older or predominantly female workforces.
Despite the relief these changes will give to employers moving forward, opponents of the tax still believe that the assumptions behind the tax are flawed and are calling for its full repeal. One such national group, “The Alliance to Fight the 40” does not intend to back down on their efforts for full repeal of the tax.
The Alliance joined this coalition of public and private sector employer organizations, labor unions, and health care companies last fall in an effort to educate lawmakers and the public on the negative impact the tax has on employers and their employees. As currently laid out, costs associated with such things as onsite medical clinics and wellness programs are subject to the tax. The Fight the 40 members believe this is just one example of how the law is flawed– by penalizing employers for using these and other innovative ways of improving their employee’s health while controlling costs.
There are still bipartisan bills in both the House and the Senate that call for full repeal of the tax. However, in light of the recent “win” with the two-year delay, not much may happen legislatively in 2016. Congress will adjourn this spring and with the election of a new President next fall, opportunities for further changes or elimination of the tax this year are limited. The Fight the 40 group will use this time to further educate the public and to increase their grassroots efforts to hit the ground running in 2017 to make full repeal of the tax a priority issue.
