The “Cadillac tax” that is part of the Patient Protection and Affordable Care Act might not cost employers nearly as much as initially estimated.
The Congressional Budget Office projects in a new report that taxes on employers’ high-premium insurance plans will generate roughly $80 billion over the next 10 years.
That figure represents a decline of almost 42 percent from the $137 billion in excise tax revenue in the CBO’s February forecast.
Starting in 2018, the IRS will impose a 40 percent excise tax on employer-sponsored health benefits totaling more than $10,200 for individual coverage and $27,500 for family coverage as part of PPACA. The 40 percent nondeductible tax is designed to discourage plans from including features that promote over- or unnecessary use of medical care, such as low or nonexistent deductibles and co-pays.
The CBO’s latest report says that it lowered the forecasted excise tax revenue figure because of new trends in employer-sponsored health benefits.
“As a result, we now expect fewer employment-based plans to be subject to the excise tax on high-premium insurance plans and, consequently, have reduced our estimate of revenues from that tax by $58 billion over the 10-year period,” the CBO’s report said.