Congress Delays ‘Cadillac’ Tax for Employers

Congress this week deferred by two years the Affordable Care Act’s pending tax on high-cost health coverage, or “Cadillac tax,” which was scheduled to become effective in 2018.Government building

The delay is part of a budget compromise reached earlier this week and as a result the Affordable Care Act’s 40% excise or “Cadillac” tax will not be enforced on employers in 2018-2019. The nonpartisan Kaiser Family Foundation (KFF) has estimated that 26% of all employers would have been affected in 2018, taxing plans that provide more than $10,200 per individual plan, or $27,450 for family plans.

This major change in the Affordable Care Act signals rare support from both sides of the aisle. It is widely reported that the delay will cost the government an estimated $9 billion. The tax is connected to inflation and growth of insurance premiums, which could eventually affect most employers. The KFF analysis estimated that the government could collect $91 billion by 2025.

Businesses have raised deductibles and out-of-pocket payments by employees in preparation for the Cadillac tax. Provision of employee health benefits in the future will continue to be affected as the repeal of the tax is debated.

While the delay will not become official until President Obama signs the budget bill, he is expected to sign the measure.

 

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