The much-maligned “Cadillac tax” on high-value employer-provided health insurance plans has been delayed for two years after President Obama signed a massive budget bill in late December that funds the federal government for the coming year.
Originally slated to take effect in 2018, the 40% excise tax—built into the Affordable Care Act (ACA) health care reform law—applies to health benefits valued above $10,200 per year for individuals and $27,500 for family coverage. Now the tax won’t kick in until 2020, giving opponents more time to kill it entirely.
The Cadillac tax was designed as a source of revenue to offset some ACA expenses. However, it quickly became a target for both conservatives generally opposed to Obamacare and others who just didn’t want good insurance policies watered down or taxed.
Labor unions oppose the Cadillac tax because health insurance has become a major bargaining chip in contract negotiations—in many cases, they have traded away wage demands in exchange for more expensive, better insurance coverage. Many employers use lavish insurance benefits as relatively inexpensive executive compensation pot-sweeteners.
Now that it has been rolled back, expect ongoing pressure to kill the Cadillac tax once and for all.