5 Important Things To Know About The Cadillac Tax
If you are an employer who tries to stay up to speed with the ACA, then you may have heard about the Cadillac Tax. If not, you’re about to! This is one of the most controversial aspects of the ACA and the Cadillac Tax tends to be a bi-partisen issue. Members of both parties in legislature feel torn over its implementation. In July, legislators voted to delay the implementation of the Cadillac Tax.
As of now the Cadillac Tax will not be implemented until 2022. This may seem far off in the distance, but that doesn’t mean that it is out of sight or out of mind! When you consider that a policy period lasts for an entire year, that means that employers need to form an opinion on the Cadillac Tax.
What Is The Cadillac Tax?
The Cadillac Tax is basically an excise tax that will be applied to the most generous of employer-sponsored health insurance plans. This is where the term, “Cadillac” comes into play. These plans would be the highest value plans that employers have to offer, the starting range of a Cadillac plan is about $11,000 for an individual and about $30,000 for a family.
What Is The Point Of The Cadillac Tax?
Great Question! When the ACA was originally being proposed, there were many questions about how to cover the additional cost that is associated with more people having health insurance. The Cadillac Tax originated as a way to cover these additional costs by placing a tax on health insurance plans of the highest value.
Who Is Onboard With The Cadillac Tax?
While opinions on this tax differ greatly, let’s talk about who thinks this tax is a great idea. The large majority of economists are ready to call “shotgun” and get onboard with the Cadillac Tax. They feel that this tax will lead employers to offer lower value health insurance, but instead they would offer their employees higher wages.
They also feel that by reducing the amount of these high value plans the demand for health services would also be reduced. The hope here is that if the demand for health services is reduced, hospitals and healthcare providers will be unable to raise their prices. Economists are convinced that the Cadillac Tax would aide in driving down healthcare prices.
Who Wants The Cadillac Tax To Stall?
So, this seems like a tax that would only affect those employers who are offering the absolute highest value plans, right? Well, there are many parties that don’t want anything to do with the Cadillac Tax. These folks include legislators on both sides of the aisles and union representatives to name a few.
The main concern with the Cadillac Tax is that it will not successfully drive down healthcare costs, but will instead shift costs onto the middle class. For example, labor unions are not happy with the prospect of the Cadillac Tax. While labor unions are not always able to raise wages for workers, they are able to provide excellent health insurance through collective bargaining.
Keep The Cadillac Tax Or Trade It In?
Don’t worry, the Cadillac Tax isn’t completely set in stone yet. The House has voted to delay this tax from taking effect twice. Therefore, whether you are for it or against it, it is likely to be tweaked for success before being implemented.
However, if you are a large applicable employer it is very important to stay on top of changing ACA standards. One of the guaranteed ways to stay ACA compliant is by taking advantage of ACAwise, a reporting solution designed to make compliance with the IRS a breeze!