The Patient Protection and Affordable Care Act's "Cadillac tax," one of the last major provisions of the health reform law to go into effect, could be the next big PPACA battle, according to a Politico report.
Scheduled to take effect in 2018, the "Cadillac tax" is a 40 percent excise tax on high-cost health plans some employers provide their workers. It is meant to reduce overall healthcare costs by encouraging employers to offer cost-effective health benefits. Under the PPACA, both fully insured and self-funding employer health plans will be subject to the tax.
With the tax looming, many large employers are already scaling back the benefits they offer employees, causing the affected workers to be offered plans with higher deductibles and co-payments. For instance, Harvard University employees used to pay part of their insurance premium and out-of-pocket costs for healthcare. However, in January, the university announced it would begin requiring employees to pay deductibles of $250 per individual and $750 per family, in addition to co-payments. Harvard employees also pay 10 percent of the cost of their healthcare services, up to $1,500 per individual and $4,500 per family.
In February, the Internal Revenue Service issued a notice addressing the tax and provided guidance on the types of coverage subject to the tax and what will trigger the tax. In the notice, the IRS suggested pre-tax employee contributions to health savings accounts will be counted in determining the cost of coverage. The agency also suggested items that may be excluded from determining the cost of coverage, including dental and vision benefits.
Approximately one-third of employers will be hit by the tax in 2018 if they do nothing to change their plans, according to a recent survey by Mercer.
The tax is receiving more criticism as its effective date draws nearer, with some complaining it discriminates against those in areas of the country where health costs tend to be higher.
"You could have parts of the country where [they] have the most lavish coverage and not be subject to the tax," Rep. Joe Courtney (D-Conn.) told Politico. However, in other areas "people will get hammered and forced into some pretty bad choices," he said.
Another critic of the tax is Rep. Frank Guinta (R-N.H.). He has introduced legislation to cancel the tax.
Unions have also strongly opposed the tax, and many unions have already reported that it is playing a role in current contract negotiations, according to Politico.
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