Budget Deal Would Provide ‘Cadillac Tax’ Relief

A provision in the budget deal approved by Congress would delay the tax for two years.

A major tax provision of the Affordable Care Act (ACA) that has employers scurrying to avoid it may be delayed if the new budget deal approved by Congress is signed by the president.

The Consolidated Appropriations Act, 2016, includes a two-year delay of the 40% excise tax on high-cost health plans (also called the Cadillac tax), making it effective in 2020 rather than 2018. The measure would also make the tax deductible for employers, further reducing their cost burden.

Data from the 2015 United Benefit Advisors (UBA) Health Plan Survey shows that even the lowest quality health insurance plans are at risk of triggering the tax, potentially affecting 74% of employers by 2022. More employers are increasing cost-sharing for employees or self-funding their health benefits in an effort to avoid the tax.

The American Benefits Council notes the budget deal would also commission a study by the U.S. Comptroller General on possible adjustments to the current benchmark for triggering the Cadillac tax to better reflect the age and gender characteristics of the national workforce.

“Many times we have enumerated the reasons why the ‘Cadillac Tax’ is bad for American workers, but the moral of the story is this: any health care policy that increases costs and reduces access to care is bad health care policy,” American Benefits Council President James A. Klein said in a statement. “More than 300 members of Congress have already signed on to repeal this tax. We urge other lawmakers to follow their lead and pursue full repeal. That process begins by approving a two-year delay of the tax immediately.”