Cadillac Tax Repeal - Passed House On To Senate



Late Wednesday (July 17th) House lawmakers passed legislation to repeal the Cadillac tax, the Affordable Care Act's tax on high-cost health plans 419 to 6.


H.R. 748, titled the Middle Class Health Benefits Tax Repeal Act, received bipartisan support for killing the excise tax, as industry groups and labor unions have become vocal in its repeal over the years since the healthcare law’s passage.


The Cadillac Excise Tax law, starting 2022, would require that plan sponsors and insurers to pay a 40% excise tax on employer-sponsored medical plans for annual premiums over $11,000 for single coverage and $29,750 for family coverage. Then annually adjusted for inflation.


Many believe that the Cadillac Excise Tax is a disincentive for employers sponsoring health plans and generally out of their hands when providing high quality coverage with low out-of-pocket costs to employees. The tax would instead force employers to reduce their benefits offerings below these thresholds, thus putting more cost onto their employees.


Fate of the tax remains unclear in the Senate, though broad support exists. AJM Associates will keep you apprised of any updates as they become available.


HISTORY

  • One of the most significant, and controversial, provisions of the Affordable Care Act was the excise tax on high-cost health plans proposed to both slow the rate of growth of health costs and finance the expansion of health coverage. The provision was often called the "Cadillac" tax because it targets so-called Cadillac health plans that provide workers the most generous level of health benefits. These high-end health plans' premiums are paid for mostly by employers. They also have low, if any, deductibles and little cost sharing for employees. A 40 percent excise tax was to be assessed, beginning in 2018, on the cost of coverage for health plans that exceed a certain annual limit ($10,200 for individual coverage and $27,500 for self and spouse or family coverage)

  • President Obama signed the bill into law on December 18, 2015 to delay the "Cadillac Tax" as part of a year-end tax extender and government funding package, the Consolidated Appropriations Act, 2016, known as the "Ominbus". This postponed the tax until 2020.

  • On January 22, 2018, Congress passed and President Trump signed a two-year delay on the 40% Excess Tax as part of a short-term federal spending bill and changed the effective date from 2020 to 2022.

  • Pending Senate approval and President signature for a full repeal of the tax.