Cadillac Tax Delay

The U.S. House of Representatives today passed a spending bill through 2016 that includes a delay in the Affordable Care Act’s Cadillac Tax for two years. The bill still requires approval by the U.S. Senate before going to the President’s desk. The Senate is presumed to approve the bill and the President is expected to sign it.

Originally slated to start in 2018, the Cadillac Tax imposes a 40% excise tax on health insurance premiums exceeding $10,200 for individual coverage, and $27,500 for family coverage. The majority of employers that would be immediately affected by the tax would be municipal and Union based health plans due to their having very rich benefit plan designs. While there is bi-partisan support to remove this aspect of the law altogether, the Administration is steadfast in keeping it. The two year delay represents a compromise within Washington and provides welcome relief to those employers who were trying to budget for the excise tax.

We expect this won’t be the last time we’ll hear a debate on the Cadillac Tax. A controversial part of the ACA, it is meant to generate revenue for the government (to help pay for health insurance subsidies) and add an incentive for employers to pare down their rich (read “expensive”) benefit plans. The unfortunate reality is that by 2020 even more benefit plans will exceed the current Cadillac Tax limits due to the continued trend in health care and benefit plan expense increases.