Debate on Cadillac Tax Continues


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the tone has changed somewhat since the CBO said the federal government would forfeit over $80 billion if the tax were repealed.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.