Dec 23, 2015

ACA Update: Cadillac Tax Delayed Until 2018

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Congress delivered an early holiday present to employers this past week when it proposed a two-year delay for a health benefits tax known as the Cadillac Tax.

However you want to look at it, the Cadillac Tax part of the Affordable Care Act was hugely unpopular. The $1.1 trillion budget deal that Congress approved last Friday included the Cadillac Tax being delayed until 2018, and put a repeal in reach of the congressional leaders and business groups who oppose it.

The House voted 316-113 Friday to approve the omnibus spending deal that congressional leaders unveiled earlier in the week. The Senate followed quickly with a 65-33 vote to approve the package and send it to President Barack Obama, who indicated he would not veto the measure.

Opponents of the 40% excise tax, which would be imposed on the portion of group health plan premiums that exceed $10,200 for single coverage and $27,500 for family coverage under the Patient Protection and Affordable Care Act, say the two-year delay is a major win for employers.

Businesses, Associations, and other affected parties reacted positively to the news:

  • “The ACA relief is welcome and appreciated,” the National Retail Federation said in a statement.
  • The delay is “the first step toward full repeal,” the Alliance to Fight the 40, a lobbying group opposed to the tax, said in a statement.
  • “Congress has done the right thing to delay a 40 percent tax that would make employer-sponsored health insurance more difficult for workers to afford and threaten patient access to potentially lifesaving care,” said Chris Hansen, president of the American Cancer Society Cancer Action Network (ACS CAN).  
  • “Consistent analysis has shown that the ‘Cadillac Tax’ disproportionately harms dependent coverage for children, and we’re pleased to see there was broad, bipartisan support in Congress to delay the tax,” said Bruce Lesley, President of First Focus, a national children’s advocacy organization. “This is a win for families.”=

While delaying the tax gives employers more time to find ways to reduce their exposure, it’s unlikely to halt much of the aggressive cost-management strategies employers have already set in motion to avoid triggering the tax, sources said.

“The majority of employers will continue down that road like they have been before the excise tax — whether or not it’s delayed or repealed,” said Steve Wojcik, vice president of public policy with Washington-based National Business Group on Health, of many employers’ shift to high-deductible health plans. “As long as overall spending for health care continues to climb faster than general inflation, there’s going to be this pressure.”

However, delaying the tax does little to fix ongoing cost increases squeezing employers’ benefits plans, prompting them to shift more costs to workers. Employers still need strategies for cost control and to maintain strong benefit plans for their employees.

In addition to the two-year delay Congress passed Friday, the omnibus budget bill also calls for a study by the U.S. comptroller general and the National Association of Insurance Commissioners of whether the ACA uses “suitable” benchmarks to determine if the tax should be adjusted to reflect age and gender factors in setting the excise tax thresholds.

The legal battles surrounding the ACA continues to confuse many people. It is important now more than ever to stay prepared every year to manage costs, have the right administrative support, and maintain excellent benefit offerings for your employees. AWANE benefit programs are best in class, fully compliant, and we have successfully operated our own private health insurance exchange for almost 10 years.

Please contact us today and let us put our “power in numbers” to work for you.