ST. LOUIS – Thought you had seen the end of major controversy over the Affordable Care Act? Think again. One of the last pieces to take effect promises to soon reignite the fierce debate on President Barack Obama's landmark health overhaul.
It's known as the "Cadillac tax" — a hefty surcharge on relatively generous employer-sponsored health insurance. The tax won't take effect until 2018, but many businesses are already bracing for it.
Some estimates project one-third of American businesses will pay the tax on some health plans in the first year.
Starting in 2018, a 40 percent tax will be levied on employer-sponsored health plans that exceed an annual limit in spending on premiums. The tax will be assessed on every dollar above a $10,200 threshold for individual coverage and $27,500 for family plans.
The tax is designed to drive down overall health care spending by curbing generous plans that encourage people to use more services than necessary. But some insurance brokers and analysts warn that the tax will cause employers to dramatically reduce benefits or drop them altogether.
"It's a shame because it is not the right thing for the employee, and the intention of the law was to get covered," said Emily Bremer, a partner at insurance brokerage and consultancy Bremer Conley. "They are going to have to address this issue, or you will see employers leaving the benefit business in droves."
Experts say the tax's threshold will not rise fast enough to keep up with health care inflation. That means businesses that escape the tax early on could still be on the hook later.
Rebecca Feldman, a senior vice president at Aon Hewitt, said some firms are shifting to plans with higher deductibles and copays to help drive down premiums. She also said businesses were restructuring benefits, such as limiting contributions to health savings accounts, as a means to delay the tax's effect.
