Last week, the effort to possibly overturn the 40% excise tax on what the Affordable Care Act has deemed “excessively rich” health plans got a boost when Hillary Clinton surprisingly supported its repeal.
Even Bernie Sanders is on board with a bill moving through Congress, which would repeal this so called “Cadillac Tax”, which goes into effect in 2018 unless something is done to derail the effort.
As currently structured, the Cadillac tax will impact employers with benefit plans which exceed $10,200 for individuals and $27,500 for families. The 40% tax will apply to the value of the plans above those caps.
What politicians fail to realize is that while the law goes into effect in 2018, as business owners we are all taking action NOW to get out in front of this, but perhaps to our own detriment?
To bring health plans below the Cadillac Tax threshold, many companies are lowering premiums by instituting higher deductible health plans. While this certainly lowers the cost of the healthcare benefit for employers, it also pushes more cost onto employees who typically haven’t enjoyed wage growth on par to offset this additional expense.
As the competition for talent and skilled labor continues to intensify, we think it’s fair to say that none of us want to cut our employee benefit programs to the point where they aren’t competitive, lest we put our employee retention and recruitment efforts at risk.
Most employers don't realize that even plans that aren't affected by the tax in 2018 soon could be: the Cadillac tax is tied to the consumer price index plus 1%, so more and more plans will be caught in its web each year. In fact, a survey by Mercer anticipates that one-third of employers will be hit by the tax in 2018, growing to 60% by 2022.
There are other ways to deal with this issue, most especially if the Cadillac Tax provision eventually gets stricken from the law. So do you have a strategic plan in place for dealing with these uncertainties around the Cadillac Tax? If not, you are not alone. We'd welcome the opportunity to share with you our benefit consulting philosophy when it comes to matters such as these. Contact us here.
(You can read more about the Cadillac Tax in our June 2nd blog post: The ACA Cadillac Tax 101: What You Need To Know)