Legislation has been introduced in the House of Representatives to repeal the Affordable Care Act (ACA) excise tax on high-cost health insurance plans scheduled to go into effect in 2018. Also known as the “Cadillac tax,” the policy would apply a 40% tax on health insurance benefits over $10,200 per person and $27,500 per family.
The bill’s lead sponsor, Rep. Joe Courtney, D-Conn., said, “Studies of the policy have indicated that it will have a disproportionate and rapidly increasing impact on older workers, women and workers in high-cost regions.”
The excise tax on high-cost plans, originally set to take effect in 2013 but delayed until 2018, will affect many employer-sponsored health plans. It has drawn significant opposition from labor unions that have previously negotiated better insurance benefits for their members in exchange for wage concessions.
The tax was designed to help finance the ACA.
A recent study by the Milliman actuarial firm found that nearly 70% of variance in health insurance premiums is explained by geographic location, while just 6% of variance is due to the comprehensiveness of the benefits. Since the excise tax is determined solely by premium cost—not the quality or “richness” of a plan’s benefits—Milliman found that it will primarily affect people who live in areas where health care costs are high.
The Middle Class Health Benefits Tax Repeal Act (H.R. 2050) is notable because it is sponsored by many Democrats who otherwise support the ACA.
The Society for Human Resourceand the American Benefits Council support repeal of the Cadillac tax.