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Cadillac Tax delayed, survives repeal
By Jeffrey Herman on June 22, 2016 at 9:41 AM

The Cadillac Tax is one of the least popular parts of the Affordable Care Act. In a nutshell, the law creates a 40 percent tax on the cost of health insurance premiums to the extent they exceed certain threshold amounts — currently $850 a month ($10,200/year) for individual coverage and $2,325 a month ($27,500/year) for all other coverage. Employer contributions to employees’ Health Savings Accounts are also subject to the tax.

The basic goal of the Cadillac Tax is to dissuade employers from providing health care coverage that is too generous. Otherwise, the theory goes, if consumers are too heavily shielded from the true costs of their care, they might obtain unnecessary services, driving up everyone’s costs.

Seemingly every politician expressing an opinion on the tax has called for its repeal, and multiple pieces of bipartisan legislation were introduced in 2015 attempting to repeal the tax. The tax survived, however, and legislators had to settle on simply delaying it. Originally set to go into effect on Jan. 1, 2018, it was pushed back to 2020. The delay will cost the government about $9 billion in foregone revenue.

Employers will need to watch closely for further developments on the Cadillac Tax. 

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