02/29/2024

26% of Employers Could Face the “Cadillac Tax” on Health Insurance

The next fight over the Affordable Care Act may center on one of its most powerful provisions to contain health care costs — the “Cadillac tax” on the most generous health insurance plans.

A new analysis released this week by the Kaiser Family Foundation estimated that just over a quarter of employers that offer health plans would pay the 40 percent tax in 2018 on at least one plan if they don’t make changes. The National Business Group on Health, a nonprofit association of large employers, found that half of its members reported that at least one of their health plans would trigger the tax in 2018. Both groups predicted that the proportion of employers affected would go up significantly over time.

That means many employers are scrambling to find ways to avoid the tax. Ultimately, that will probably mean a combination of paring benefits and shifting cost to employees through high deductible plans, capping or eliminating flexible savings accounts, and offering less generous plans that, for example, limit access to a narrower networks of doctors and hospitals.

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