The Affordable Care Act’s high-cost tax plan (HCPT), or “Cadillac Tax,” might be repealed before it even gets off the ground. The HCPT is unpopular with employers because it is an annual tax on high-cost employer-sponsored health coverage. The 40% excise tax will be a surcharge on the value of employer-based health premiums above a specific threshold.
Organizations, like SHRM, have voiced their support for the repeal. In a letter written to Sen. Dean Heller and Sen. Martin Heinrich, Michael P. Aitken, SHRM’s vice president of government affairs, said, “If the 40 percent excise tax is not repealed, many employers may be forced to cut benefits, alter wellness and chronic care prevention programs, and reduce innovative new benefit offerings.” Speaking of the effect the tax will have on employees, Aitken adds, “Employees will be negatively impacted by higher copays and deductibles and could even cause some to decline employer-provided health care.”
Those in favor of the tax claim that the purposes of it are to reduce tax preferred treatment of employer provided health care, reduce excess health care spending by employees and employers, and help finance the expansion of health coverage under the ACA. A concern for advocates of the tax are that if changes are made to the ACA, while simultaneously repealing the HCPT, then there could be a revenue shortage.
Leading the charge to repeal the “Cadillac Tax” is Sen. Dean Heller and Sen. Martin Heinrich, who rolled out a bipartisan bill on Jan. 10th. President-elect Donald Trump is in favor of the bill, paving the way for a successful removal of the tax.
Previous attempts to remove the tax were opposed by the Obama Administration and as a result the implementation of the tax was pushed from 2018 to 2020. It is estimated that the delay will cost the government $9 billion.
The HCPT was given the popular nickname the “Cadillac Tax,” because just as a Cadillac is viewed as a luxurious vehicles, only the most expensive employer-sponsored health insurance plans would be taxed.
According to the HCPT, the thresholds for high-cost plans are $10,200 for an individual and $27,500 for family coverage. These thresholds are subject to increase if a majority of employees are engaged in specified high-risk professions or are members of a certain age or gender.
Loren Adler, an associate director at the Brookings Institution’s Center for Health Policy, says, “Self-preservation is at play for the benefits industry. From a business perspective, companies want to continue to take advantage of the full tax exclusion since untaxed dollars make paying workers a little cheaper.”
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Andrew is a marketing Communications Specialist for Zuman, the one solution for HR, payroll, and benefits administration that supports growing small to midsize businesses.More Content by Andrew Larsen