Beginning in 2018 the Affordable Care Act will implement an excise tax on “high cost” job-based health insurance—single plans with yearly premiums exceeding $10,200 and family plans with premiums exceeding $27,500. Congress is currently considering several bills, authored by Democrats and Republicans alike, that would repeal the tax. This blog post is the second in a series in which I discuss the likely consequences of the excise tax policy. (See first post: The ACA Excise Tax Targets Where You Live and Other Factors More than Benefit Levels.)
The excise tax on high cost job-based health plans is typically described as a “Cadillac tax,” but this is misleading. The premise behind the excise tax is that it will rein in overly generous job-based health plans; the evidence indicates, though, that the tax is poorly targeted because premiums depend more on where you live, the health of your co-workers, and your company’s size than on generosity of benefits. It is those factors, not plan richness, that will be more likely to determine whether the health benefits you get through your job are taxed.