Obama’s new ‘Cadillac Tax’ changes won’t end repeal efforts
Consistent criticism about the ACA’s “Cadillac Tax” and its corresponding calculation method has led the Obama administration to do something that was unthinkable just months ago: Propose major changes to the controversial health reform provision.
Part of the administration’s budget proposal for FY 2017 includes a tweak to the current threshold for the Cadillac tax.
Prevents ‘unintended burdens’
The crux of the changes would address the inherent unfairness of having a single excise tax threshold that applies to plans when there is such a great contrast in healthcare costs throughout different geographic locations.
On the New England Journal of Medicine website, Jason Furman, chairman of the administration’s Council of Economic Advisers, and Matt Fiedler, the council’s chief economist, detailed how, under the proposed changes, the tax would be adjusted based on the cost of the average gold plan available on the state exchanges by saying:
The most significant provision specifies that in any state where the average premium for “gold” coverage on the state’s individual health insurance marketplace would exceed the Cadillac-tax threshold under current law, the threshold would instead be set at the level of that average gold premium. This policy prevents the tax from creating unintended burdens for firms located in areas where health care is particularly expensive, while ensuring that the policy remains targeted at overly generous plans over the long term if health costs rise faster than the tax thresholds (which will rise with the overall Consumer Price Index).
In other words, if your company was located in a state where the average premium for “gold” coverage on the individual insurance marketplace was greater than the ACA’s current Cadillac Tax thresholds, you wouldn’t trigger the tax unless your plan exceeded the average gold plan premium cost.
Under the current regs, the 40% excise tax on high-value (aka, “Cadillac”) plans would be imposed on any plans with premiums that exceeded $10,200 for individual coverage and $27,500 for family plans.
Not the first major change
This proposed tweak to the Cadillac Tax comes right on the heels of another major change to the reg: A two-year delay. Back in December, President Obama was under pressure to get a budget deal passed by year-end and signed a budget bill that delayed the implementation of the tax until January 1, 2020. Initially this ACA reg was slated to take effect on January 1, 2018.
That legislation also included another major change to the reg. Under the bill, any amounts that employers pay toward the tax will now be tax-deductible expenses. Plus, the budget bill — a piece of legislation that will fund the federal government through the 2016 fiscal year — is requesting that a study by the U.S. comptroller general and the National Association of Insurance Commissioners into whether Obamacare uses “suitable” age and gender benchmarks to determine the excise tax thresholds.
So will Obama’s recent attempts to make the dreaded Cadillac Tax more palatable to its critics be enough to end the current repeal crusade?
Not likely.
Even with the changes, a number of prominent business groups — including the American Benefits Council and SHRM — have already said they won’t settle for anything but a total repeal of the tax.
