"Cadillac" Health Plan Tax Delayed
Author: Robert S. Teachout, XpertHR Legal Editor
January 24, 2018
The start of a tax on "Cadillac" health plans has been delayed from 2020 until 2022.
The tax was passed as part of the Affordable Care Act as a way to bend the cost of health care downward by encouraging employers to offer less-generous healthcare plans to employees. The "Cadillac Tax" is a 40% surcharge on high-cost employer-based health plans that exceed specific premium thresholds.
Originally, the excise tax was to go into effect in 2018, but it has been unpopular with both Republican and Democratic members of Congress. The tax was postponed to 2020 in the Omnibus Appropriations bill signed by President Obama in 2015, and then postponed again until 2022 as part of a bill funding the federal government through February 8 in order to end a government shutdown.
Not everyone disagrees with the Cadillac tax. During the debate on the 2015 Omnibus Appropriation, 101 economists signed a letter urging Congress "to take no action to weaken, delay, or reduce the Cadillac tax." They reasoned that the excise tax would be an effective way to encourage employers and employees to consider cost-effective health care choices and reduce premiums.