“Cadillac Tax” Likely to Scale Back Employee Benefits

Published September 22, 2015

The “Cadillac tax,” a new tax under Obamacare taking effect in 2018, could force some employers to cut back or even eliminate employer-provided health care benefits for their workers.

The new excise tax will be levied on certain high-cost insurance plans exceeding $10,200 annually for one person or $27,500 annually for family coverage. It will be imposed on any self-insured employers or insurance companies selling group health plans to employers and insurance carriers will almost certainly pass along the additional cost to clients.

In the past, employer-proved health plans haven’t been subject to income taxes or payroll taxes, which is an enormous tax break that amounted to an estimated $250 billion in 2013, according to a June Congressional Budget Office report.

By taxing high-cost employer-provided health plans, the Obama administration hopes to boost federal revenue, curb health care spending and help pay for federal subsidies lower-income customers use to buy health insurance through the government-run Obamacare exchanges.

Tax Will Impact Benefits

Despite the Obama administration’s predictions, some say it will harm the ability of employers to provide health insurance as a benefit of employment to their workers.

The San Antonio Express-news quoted Dwight Lieb, owner of La Fogata, a San Antonio-area restaurant that offers health benefits to all 94 of his employees, saying, “It’s the ultimate of stupidity. You get penalized for giving your employees greater benefits.”

According to experts in the insurance and benefits industries, employers or businesses of any size could be at risk of incurring the tax.

The Express-news quoted Mike Grossman, president of The Bank of San Antonio Insurance Group, saying, the Cadillac tax is “a clear, unintended consequence of the law.”

Kenneth Artz ([email protected]) is managing editor of Health Care News.

Internet Info

Peggy O’Hare, “New health insurance tax likely to scale back employee benefits,” San Antonio Express-news, September 21, 2015: