Two bills have been introduced in Congress to fix a major flaw in the Affordable Care Act (ACA) that threatens to deny health coverage to millions of middle-class Americans, and agents and brokers selling all lines of business ought to unite in support of those bills.
Much has been said and written about a provision included in ACA that has been dubbed the “Cadillac Tax.” The tax is a 40 percent excise tax that will be levied on so-called “overly generous” employer-sponsored health plans.
Employer-sponsored coverage is by far the largest source of insurance among Americans younger than age 65. In fact, ACA even has incentives for people to take up employer policies. The Rand Corp. reports that in 2013-2015, employer-sponsored health plans showed the biggest gain, with 9.6 million newly enrolled as a result of Obamacare.
So why on the one hand would ACA encourage enrollment in employer-sponsored plans, while at the same time administer a strong disincentive, starting in 2018?
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Advocates of the Cadillac Tax are unable to explain how arbitrarily slapping some people who already have health insurance with a 40 percent excise tax will help them. Clearly, it will not. To the contrary, it will punish people simply because they already have good coverage. That’s inherently unfair. It is also counterproductive.
A time bomb
Why is this happening? This surtax is a major component intended to finance ACA. The problem is that it attempts to do this by reducing the benefits of people who already have employer-sponsored coverage. The Cadillac Tax is a time bomb set to explode in 2018 that would begin to dismantle the private sector’s system of employer-based coverage. Such a poison pill threatens to divert money away from the private sector, into expanding the government’s healthcare system.
The 40 percent excise tax would also enable the rationing of health care. It would strip away good coverage from some people who already have it. It would disproportionately impact singles, women, families and the elderly. It would effectively lower the quality of coverage, in order to help finance a similarly lower level of coverage for more people, creating a race to the bottom. Using an excise tax to strip benefits from selected groups of middle class Americans is not only discriminatory, it runs counter to the goal of expanding access to affordable coverage for all.
A Mercer survey recently estimated that the Cadillac Tax would impact 31 percent of employers in 2018 and 51 percent of employers by 2022, indicating it will have a much broader effect than Congress intended.