Even though the Affordable Care Act’s “Cadillac tax” on high-cost health plans was delayed until 2020, many employers are still reducing benefits and shifting costs to avoid paying the tax, according to EBRI.
EBRI held a policy forum addressing the potential impact of the tax in December 2015, a few days before Congress voted to delay implementation of the tax from 2018 to 2020. It published a summary of the forum in March.
The tax is a 40% excise tax on the combined employee and employer share of health care coverage when the cost of coverage reaches $10,200 per employee for those with self-only coverage, or $27,500 for employees with family coverage. In determining whether they reach that threshold, employers have to include contributions to flexible spending or health savings accounts when workers’ contributions are pre-tax. Retirees’ health care costs would also be included.
Paul Fronstin, director of EBRI’s Health Research and Education Program, said there are two goals of the tax: paying for other provisions in the Affordable Care Act and mitigating the rising cost of health care.
The Joint Committee on Taxation estimated the tax will collect $91 billion over 10 years, 75% of which will come from workers’ wages that previously weren’t taxed, according to EBRI. The two-year delay will cost about $9 billion in lost revenue.
Potential impacts on workers, according to Fronstin, include reduced health benefits overall, as well as dropped coverage for spouses. He noted that IRS notices indicate that the cost of employee-only coverage will be calculated differently from family coverage, but that there doesn’t seem to be a provision for employee-plus-one coverage.
Employers may be less inclined to offer on-site medical clinics because they will be included in employers’ cost calculations unless the offer only minimal care, he said.