This bill would repeal the Affordable Care Act’s so-called “Cadillac tax” which imposes a 40 percent excise tax on high-cost employer-sponsored health insurance plans. The Cadillac tax is currently scheduled to take effect in 2020, and would apply to health plans that are valued at more than $10,200 for individuals or $27,500 for families. Premium payments made by both employers and employees plus contributions to a variety health savings / spending accounts count toward that total.
Under current law, health benefits provided by employers are excluded from their taxes, which can incentivize employers to pay a greater share of their employees’ compensation in the form of health benefits rather than in wages. The Cadillac tax essentially creates a cap on this tax exclusion by imposing a tax on high-cost health plans offered by employers. It also is not currently indexed to inflation or healthcare costs, meaning that as health insurance plans get more expensive more people will end up paying the tax.