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No Matter the Size of Your Company, the Cadillac Tax Applies to You!


No Matter the Size of Your Company, the Cadillac Tax Applies to You!

Posted by on Dec 29, 2015 in Blog News

“In 2018, the excise tax is anticipated to hit 17 percent of all American businesses, and 38 percent of large employers. Large employers subject to the excise tax in 2018 will pay an average of $1.0 million that year, and an average of $2.1 million per year from 2018 to 2024, or over $2,700 per employee.”    – American Health Policy Institute

It not uncommon for small-medium size employers to say the ACA does not apply to them. Many think that the main cause of concern in the ACA is the employer mandate penalty. Employer mandate penalties are certainly leading in ACA news coverage but they are one portion of an enormous and multi-faceted policy change. There are a myriad of provisions of the ACA that apply to all size companies as well as individuals. It is important for all companies to begin learning more about the Cadillac Tax now and discussing its future implications on employee benefits plans and cost projections.

“Many employers are transitioning to consumer directed health plans (CDHPs), including the CDHP type known as a high deductible health plan (HDHP).More than three-quarters (76%) in the National Business Group on Health employer survey are implementing or expanding CDHPs. One-third of employers surveyed (33%) are planning to offer only CDHPs for 2016. As health care costs rise, it will be more difficult for employers to provide affordable health care benefits to employees. The increase in health care costs will eventually cause average benefit plans to be taxed as “Cadillac plans.” According to a recent report, “Within twenty years, the impact of the excise tax will not be limited to just high value plans. By 2031, the cost of the average family health care plan is expected to hit the excise tax threshold.”         – SunLife Health Care Reform Update, September 2015

At present, this provision applies a 40% excise tax to health care costs above $10,200 for individuals and $27,500 for family in 2018. These amounts are set to increase with the Consumer Price Index which tends to inflate far below the rate of health care costs.  In addition, geographic areas will experience dramatically different Cadillac Tax impact as a result of extreme health care cost discrepancies among states and regions.