Debate on Cadillac Tax Continues

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While there is plenty of discussion about the tax on high cost health plans, the tone has changed somewhat since the CBO said the federal government would forfeit over $80 billion if the tax were repealed.

One of the big concerns related to the Cadillac Tax is its impact on benefits that help reduce out-of-pocket costs for working families. When the tax takes effect in 2018, a 40% levy will apply to benefits that exceed the government-set threshold. Employer contributions to FSAs and HSAs, and even costs associated with on-site clinics, would be included in the tax calculation.

Doing away with these accounts would increase out-of-pocket costs for millions of Americans. While lawmakers on both sides of the aisle support a bill to repeal the tax, they face an uphill battle. Not only is the government counting on the tax to raise a projected $87 billion over 10 years, but President Obama has stated he will veto any legislation that weakens the health care reform law.

A trend that many say is related to the tax is a continued rise in deductibles, which according to Kaiser Family Foundation research, have increased by about 8% from a year ago. Recent polling by consultant Mercer shows that 41% of employers have already added a high deductible plan in anticipation of the tax.