Group Health Insurance Dallas Employs a Cadillac Tax, “The Next Big Affordable Care Act Battle”

Mix of business groups and labor unions pushing the next big Affordable Care Act fight: killing its so-called Cadillac tax embedded within Group Health Insurance.

DALLAS, TX – APR 25, 2015 – One of the last big parts of the Affordable Care Act to go into effect, the Cadillac tax embedded within Group Health Insurance. Lawmakers delayed the levy until 2018, in part because it is so controversial, but companies are wrestling with it now as they plan employee benefits with some already negotiating with unions over benefits that could spill into 2018. While nixing the levy could produce as much as an $87 billion budget hole, many expect it to be the next protracted battle over the Affordable Care Act — one that threatens to become a headache for Democrats, many of whom never liked the tax despite more general wide-ranging support of the law. It is, though, the type of legal “fix” on which both Republicans and Democrats can agree.

Last month, the Internal Revenue Service (IRS) began detailing how exactly the tax will work, though it left out many of the details employers say they need. Specifically at issue is the 40 percent excise tax on the health benefits companies provide their workers above a certain threshold. In 2018, the tax will hit insurance and related perks valued at more than $10,200 for singles and $27,500 for families. So for family benefits valued at $30,000, the tax would apply to the $2,500 that’s above the limit.  It appears as if the tax will be less evasive for group health insurance in the Midwest in cities such as Dallas, TX.

While the Obama administration has long argued it is only a modest step to get health care costs under control, Obama economic adviser Jason Furman wrote in a 2009 White House blog post noting that it “will affect only a small portion of the very highest-cost health plans — a total of 3 percent of premiums in 2013”.

That may prove unfortunate for businesses eager to attract workers and unable to increase pay. Companies have turned to expanding fringe benefits such as health insurance, but economists of all stripes have complained the open-ended tax break companies get for providing that coverage drives up health care costs while disproportionately benefiting the affluent.

This is mainly because the threshold at which the tax kicks in is higher than the current average premium rates, according to the nonpartisan Kaiser Family Foundation. The typical family plan cost $16,834 last year, according to Kaiser, while the average individual plan cost $6,025.

Experts maintain, though, that the tax is more onerous than it appears, in part because it hits more than just traditional health insurance. It applies to health savings and flexible spending accounts also, including money workers now sock away tax-free for medical expenses. Supplemental insurance plans are also to be included and, potentially, on-site health clinics that companies set up for workers according to the IRS.

This will result in the tax ensnaring more companies over time, with some even likening it to the alternative minimum tax, a tax originally aimed at the very wealthy but which trickled to those further down the income ladder. That’s a good thing, say many, noting that overly generous insurance shields beneficiaries from costs, encouraging them to use more services, driving up prices for everyone.

It’s a matter of fairness, some say, because forgoing taxes on health care benefits amounts to a major break for those with jobs offering coverage. According to a March survey by Mercer, a benefits consulting firm, one-third of employers will be hit by the tax in 2018 if they do nothing to change their plans. By 2022, almost 60 percent will be facing the levy.

Businesses have already been pushing their workers out of high-cost plans and into ones with bigger deductibles while at the same time offering them health savings accounts in order to help them cope with the increased costs. Both would be subject to the levy.

Connecticut lawmaker Courtney noted that “You could have parts of the country where [they] have the most lavish coverage and not be subject to the tax,” while in other areas “people will get hammered and forced into some pretty bad choices.”

The levy, projected to generate $87 billion over a decade, ramps up slowly, but is estimated to eventually produce so much money that it alone will cover the cost of providing insurance subsidies through the program’s exchanges, a big reason why Congress’ independent budget scorekeepers have said the Affordable Care Act won’t add to the deficit, and why the tax will be tough to repeal.

Insurance4Dallas, (I4D) helps insure all of Texas and provides consumers with detailed information and the ability to apply for insurance online. I4D provides a full spectrum of health, dental, vision, life and other ancillary insurance products providing a diverse selection of price and benefit options complemented by personable customer service.



This entry was posted in Health Care Reform. Bookmark the permalink.

Leave a Reply

Your email address will not be published.