The Obamacare “Cadillac tax,” which will tax businesses for employee health plans that are above a certain level by 40 percent, could be the next big fight in the push to either repeal or change the Affordable Care Act.
This particular piece of the Obamacare law will not go into effect until 2018, but it is already causing headaches for businesses as they put together employee benefit plans.
Politico has an in-depth story about the “Cadillac tax,” which will apply to individual health plans worth more than $10,200 and family plans worth more than $27,500.
The current system in place allows companies to write off costs related to providing their employees with health insurance. But the new levy, which has been estimated to bring in $80 billion over 10 years, could have an adverse affect on employer-provided health plans.
Unions are known for offering employee-friendly benefits but they’re already feeling the pinch, reports Politico.
“Employers are coming to the table asking for cuts in benefits based on their preliminary projections around the tax,” Shaun O’Brien, the AFL-CIO assistant policy director for health and retirement, told Politico.
The AFL-CIO and the National Education Association (NEA), another strong union, have called for the tax to be removed from the Obamacare law.
“We continue to support the Affordable Care Act,” Kim Anderson of the NEA said in the Politico report, adding, “the excise tax on high-cost plans can randomly and unfairly cause hardship to American workers and their families.
“Congress must repeal the excise tax.”
The tax applies to more than actual healthcare plans, however. It encompasses flexible spending accounts and other health savings accounts, along with supplemental health plans. Politico also reports that on-site clinics companies set up for employees could also fall under the umbrella of the tax.
Politico cites figures from the Kaiser Family Foundation that show the average individual health plan cost $6,025 last year, compared to $16,834 for a family plan.
And if companies are able to stay below the threshold and avoid paying the tax, that could change in the future thanks to inflation.
The tax is “linked to the consumer price index plus 1 percent, even though medical costs typically grow much faster,” the Politico report reads. “Private healthcare spending per enrollee will grow by an average of 5.6 percent annually over the next decade, according to the Congressional Budget Office, while inflation will increase by 2 percent per year.”
Numbers cited by Politico say that nearly 60 percent of U.S. companies will be affected by the tax by 2022.
In February, Republican Rep. Frank Guinta of New Hampshire introduced a bill that would erase the tax from the Affordable Care Act.
“My legislation will protect workers from facing this devastating tax increase, employers from reducing workers’ benefits, and municipal taxpayers who — if enacted — would experience skyrocketing property taxes,” Guinta said. “The repeal of this onerous tax has received widespread support from Republicans, Democrats, national unions and more.”
A Forbes article, meanwhile, called the tax “a rifle shot tax that is supposed to discourage something very specific. And it now looks likely to apply to more and more people, and to more and more plans. In that sense, it is a kind of rifle shot that has turned into a shotgun blast.”