Cadillac Tax Delayed Until 2022
Yesterday was a big day for the broad coalition of employer and labor groups -- including Mercer and The Alliance to Fight the 40 -- that have been advocating for repeal of the Cadillac Tax. The president signed a short-term spending measure that included a two-year delay of the effective date for the 40% excise tax on high-cost medical plans, from 2020 to 2022. The act will also halt the ACA's 2.3% medical device tax for 2018 and 2019 and suspend the health insurance tax (HIT) for 2019. Both of those taxes were reinstated this year. The ACA tax changes approved by the House that repealed the individual mandate penalty remain in effect.
In 2010, when the ACA was signed into law, the so-called Cadillac Tax was the biggest concern for employers that provide health insurance to 178 million Americans. That’s not surprising, since nearly a fourth of employers were likely to get tagged by the tax in its first year, even though it was supposedly going to affect only very rich-- “Cadillac” – health plans. The design of the tax is flawed in that it uses cost as a proxy for benefit richness, when in fact there are many factors beyond plan design that can drive up the cost of coverage: geographic location, population age and health risk, and the number of enrolled dependents, to name a few. In addition, the tax could compel employers to stop offering wellness programs and on-site clinics, and to reluctantly ask employees to bear even higher out-of-pocket costs as a way to get the premium cost below the tax threshold.
While we are grateful for the two-year delay, we know there is bipartisan support for a full repeal. Along with other employer coalitions and advocacy groups, we are committed to keeping the pressure on.