Swerve-to-Avoid the Cadillac Tax, Advice from the Experts

cadillac tax
Senator Eckardt addresses MACo Conference attendees in the session, Here Comes the Cadillac.

Nicknamed the “Cadillac Tax” for its application to higher quality plans, a new 40% excise tax on certain employer-provided health care plans will soon be taking effect. However, with base thresholds for the tax at $10,200 for self-only coverage and at $27,500 for all other coverage tiers, the tax’s broad application means it might better be nicknamed “Chevrolet.”

Accounting experts and healthcare legislative analysts gave MACo Summer Conference attendees insider information on the effect of the Affordable Care Act’s excise tax on employer-provided health care plans, including ways to avoid and mitigate the tax’s effect, how to take advantage of the opportunity for review that the tax creates, and the outlook of federal legislation to repeal the tax.

Brian Bowden, National Association of Counties Associate Legislative Director for Health, gave an overview of the effect of the new tax and shared progress on legislation to repeal the tax. Legislation to repeal the tax has been introduced in the House and will likely also be introduced in the Senate.  Four of Maryland’s congressional representatives have signed on to legislation to repeal the tax in the House. NACo is working with House and Senate members to advocate for a repeal of the tax.

Mark Lynne, President of Bolton Partners’ Health Plan Consulting Division shared how the tax applies to pre-tax healthcare purchases, including the pre-tax contributions to health savings accounts by employees.  This could create unequal application of the tax to employees that have the same employer-sponsored healthcare plan. Dental and vision plans that are not automatically packaged with medical, however, would not be counted towards the thresh holds used to apply the tax. By providing higher salaries and wages to employees while lowering employer-provided healthcare benefits, employers may be bale to avoid the tax, while enabling employees to purchase supplemental healthcare coverage.

Lee Diemer, Director of Large Employer sales at Benefitfocus shared national data on rising health care costs, showing a doubling of costs over the past five years. He suggested the idea of complimenting a high deductible healthcare plan with voluntary benefits, a method used in the private sector, in county government plans. Couching the tax as a potential opportunity for broad review of healthcare plans and expenditures, he encouraged counties to begin a conversation about coverage, and the possibility that many of their employees are over-insured. A representative of a healthcare software company, he shared the importance of healthcare products that are friendly to the end-user, noting that most employees spend more time considering options for a flat-screen TV than reviewing the options for their healthcare plan.

The Maryland Association of Human Resources Officers sponsored Here Comes the Cadillac Tax, which was moderated by Senator Addie Eckardt of Caroline, Dorchester, Talbot, & Wicomico Counties. Senator Eckardt is a registered nurse and currently serves on the Senate Budget and Taxation Committee.

For more information, follow-up with our expert panelists and review this NACo publication, Excise Tax on High-Cost Employer-Sponsored Health Coverage: What Counties Need to Know.

Lee Diemer, Director of Large Employer sales at Benefitfocus

Mark Lynne, President of Bolton Partners’ Health Plan Consulting Division

Brian Bowden, National Association of Counties Associate Legislative Director, Health