As part of its recently improved budget deal, Congress passed legislation that delays implementation of the Affordable Care Act's Cadillac Tax for two years.
The spending bill, which passed the House in a 316-113 vote and the Senate with a 65-33 vote, would delay implementing the Cadillac Tax until 2020. Originally scheduled to go into effect in 2018, the Cadillac Tax was designed to restrict employers from offering high-cost employer-sponsored health plans by placing a 40 percent excise tax on plans exceeding $10,200 for individual coverage or $27,500 for family coverage annually.
"Opponents of the Cadillac Tax see its delayed implementation as a sign of its eventual repeal."
Some opponents of the Cadillac Tax see its delayed implementation as a sign of its eventual repeal. In a statement, James A. Klein, president of the American Benefits Council, said support for repealing the tax is diverse and includes patient advocates, unions and private and public sector employers.
"We applaud Congress for passing a two-year delay of the 'Cadillac Tax' and thank the Congressional champions who made this possible," Klein said. "The delay provides a much-needed down payment toward the ultimate goal of full repeal."
However, Forbes contributor Brian Blase argued the Cadillac Tax would actually remedy a major problem with the Affordable Care Act: the tax exclusion for employer-sponsored health insurance leads to employers offering overly expensive insurance. This leads to lower wages for workers who see more of their pre-tax income going to pay for their employer-sponsored insurance plans.
Controlling health care cost
According to a report from the Mercatus Center at George Mason University, this tax loophole also creates market distortions and leads to $300 billion in untaxed revenue each year.
"Many of the United States' current health-care-related problems – from lack of choice and competition to rising costs – stem in part from the tax exemption for employer-provided health insurance," the Mercatus report concluded.
"Proponents of the Cadillac Tax argued it would help to slow U.S. health care spending."
As reported by Business Insurance, group health care plan costs are increasing each year, and proponents of the Cadillac Tax argued it would help to slow U.S. health care spending. Even though the tax is delayed for now, many insurance providers had already begun restructuring their offerings in order to lower their rates and avoid the 40 percent levy. According to a report from the Kaiser Family Foundation, 53 percent of large employers with 200 employees or more have already analyzed their plans to see if they would be hit with a high-cost plan tax and many have made changes to lower plan expense. The Kaiser report also found 8 percent of large employers had already switched to lower-cost plans.
However, as CNN noted, many employer-sponsored plans have also begun passing on the cost of the Cadillac Tax to employees by increasing deductibles and other out-of-pocket expenses. Wellness programs, on-site clinics and other costly programs may also be eliminated as employers look for ways to control the health care costs they are absorbing.