Sunday, July 19, 2015

How Obamacare's Cadillac Tax Could Eventually Get You and Your Health Insurance?

It won't happen right away for most, but overtime as price inflation climbs (specifically for health coverage), the tax could hit your employer big time and then what is your employer going to do?

Dan Caplinger explains how it is set to devekop:
The Patient Protection and Affordable Care Act, better known as Obamacare, was signed into law in early 2010. Yet even now, more than five years later, not all of the law's provisions have come into effect. In particular, one element of the Obamacare legislation that has drawn attention recently involves what's known as the "Cadillac tax" on high-value health-insurance coverage. The Cadillac tax isn't scheduled to affect anyone until 2018, but already, the provision is drawing debate among politicians and policymakers on both sides of the Obamacare divide. To help give you more information about this tax and how it might affect you, let's take a more in-depth look at the Obamacare Cadillac tax and its provisions.

What  the Obamacare Cadillac tax does

The Affordable Care Act's stated purpose was to give more people access to health insurance coverage, but the Cadillac tax focuses on the other end of the spectrum: those workers whose employers provide extremely comprehensive and costly health insurance policies. Under the Cadillac tax, beginning in 2018, employers have to pay a 40% excise tax on the costs of each employee's health insurance to the extent that it exceeds a certain threshold. For individual policies, the starting threshold amount is $10,200. That amount rises to $27,500 for family coverage....

the most interesting thing about the Cadillac tax is that from a political standpoint, many of those who have supported Obamacare in general are lukewarm at best about imposing the tax. Some of those most opposed to the tax are labor unions, whose efforts to negotiate high-quality health benefits are encountering resistance from employers facing the added expense of paying the tax. Others note that having borne the costs of providing coverage under Obamacare, it would create a budgetary imbalance to repeal the Cadillac tax and give up an estimated $90 billion in potential revenue to help pay for the program over the next decade.

Moreover, the Cadillac tax doesn't just look at health insurance premiums. It also includes employer contributions to health savings accounts, flexible spending accounts, and some other tax-favored forms of benefits related to healthcare. Many of these features were designed specifically to encourage workers to pay more attention to their healthcare costs, so opponents would argue that penalizing employers for using them seems inconsistent with the purpose of the Affordable Care Act.

Another objection to the Cadillac tax is that its impact could get more pervasive over time. Increases in the premium-cost thresholds are tied to the Consumer Price Index, and over the long run, premium costs have tended to rise at a much higher rate than this general inflation benchmark. The result is that employers could find an increasing number of their employees are generating Cadillac tax liability.

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