cadillac

As The Kiplinger Letter so aptly states, the Cadillac tax may soon turn into the Chevy tax.  The 40 percent excise levy starts in 2018 for insurance premiums above $10,200 a year for an individual and $27,500 for families.  It’s important to note that the coverage ceiling is indexed to overall inflation and not to medical costs, which rise much faster (2.4 percent in 2014 compared with 0.08 percent in overall inflation).

So, over time, more moderately priced plans will bump up against the limit.  Initially about 14 percent of firms will pay the tax in the first year, but more than two thirds of businesses could be subject to it by 2023.  The purpose of the tax is to generate 80 billion dollars over the next 10 years to help finance the expansion of ObamaCare health care coverage.

Employers on fully insured plans will calculate their costs, and the insurance companies will pay; while employers with self-funded health insurance plans will be responsible to calculate the costs and pay the tax themselves.  However, most self-funded plans’ TPA’s will probably assist in this process.  And, if you’re wondering how this tax will be paid, here’s the good news:  the government has no forms or instructions available at this time.

In summary, employers will have to deal with these new costs by better managing their claims through aggressive wellness programs (thereby driving down the cost of health insurance) or require workers to pay more out of pocket toward the cost of the policy, offering less generous benefits and higher deductibles.

Cary Hall

America’s Healthcare Advocate