Paige Winfield Cunningham reports for the Washington Examiner on the latest tax hit associated with the Affordable Care Act.
One out of four U.S. employers may soon face a steep new Obamacare tax on the insurance coverage they offer workers, unless they take steps to reduce overall spending on the plans.
A new analysis released Tuesday by the Kaiser Family Foundation found that 26 percent of employers offer health benefits that could be subject to the Affordable Care Act’s “Cadillac” tax on high-cost plans when it starts in 2018.
The tax kicks in when the total spending on a health plan — including the employer and employee premium contributions — exceeds $10,022 for an individual or $27,500 for a family. Total spending includes not just the cost of the plan, but also any contributions made to a health savings account or a flexible spending account.
It’s expected to prompt many employers to pare down the benefits they offer in order to duck the tax, which will equal 40 percent of the difference between a plan’s total cost and the allowed threshold.
“The potential of facing [a high-cost plan tax] assessment as soon as 2018 is encouraging employers to assess their current health benefits and consider cost reductions to avoid triggering the tax,” wrote Kaiser’s Gary Claxton and Larry Levitt.
Employers have a number of different levers to pull to escape the tax. They could increase deductibles and other cost-sharing aspects. They could eliminate some previously covered services. They could cap or eliminate tax-free savings accounts used to pay health expenses. They could narrow the network of providers employees can see.
But virtually all of the potential changes would result in employees having to shoulder more of the cost of their health plans.
