Since the inception of the Affordable Care Act, many employers have been concerned about the looming “Cadillac” tax scheduled to take effect in 2018.
Insurance companies and employers with self-funded health plans will be on the hook for this excise tax—to the tune of a 40% penalty on the value of their health plans in excess of certain thresholds. These plans are also known as high-cost plans, or “Cadillac” plans, which is where this tax’s nickname comes from.
What qualifies a health plan as high-cost?
Individual: a health plan valued at more than $10,200 per year
Family: a health plan valued at more than $27,500 per year
How much is the tax going to be on high-cost plans?
The tax will be 40% on the plan value in excess of the specified thresholds listed above. For example, an individual plan valued at $12,200 annually will have the 40% tax assessed against the $2000 in excess of the $10,200 threshold, or $800.
So who pays this excise tax?
Good question. The ACA states that this tax will be levied against the insurance carriers offering these high-cost plans, but it seems reasonable to expect the carriers to pass the tax down to their customers in the form of increased premiums on these already-expensive health plans. And this is why many businesses and agencies with rich plans are concerned about the “Cadillac” tax. For large organizations with expensive health plans, this tax has the potential to add up very quickly.
For instance, the NH Health Benefit Program (which covers over 10,000 active state employees in New Hampshire) will be on hook for an estimated $14 million annually when the tax takes effect in 2018.
This was the issue being addressed with NH House Bill 596, which proposed legislating that any ACA excise tax burden would be shouldered by the state employees, as opposed to the state itself (and ultimately, the taxpayers). The NH House Commerce and Consumer Affairs Committee held a public hearing to discuss the merits and drawbacks of the bill several weeks ago.
While the political conversation in Concord was moving towards deciding who should be responsible for the burden of this tax, the analytics team at MyMedicalShopper worked on a different approach to this issue—avoiding the tax altogether.
What was the result of this effort?
The end result was a proposal to save the State of New Hampshire over $100 million on healthcare over the next three years, avoid any exposure to the additional $14 million in annual excise taxes starting in 2018, and at the same time improve health benefits for state employees!
An expert spokesperson for MyMedicalShopper made the trip to Concord to present this proposal to the Commerce and Consumer Affairs Committee. And we documented his whole trip so you can see what happened. The reaction from the committee is pretty unbelievable!