Cadillac Tax (Part 1)

Cadillac Tax (Part 1)

by Posted on: October 28, 2014Categories: HR & Compliance   

High-cost health plan taxes, often referred to as Cadillac plan taxes, are expected to impact plans provided by healthcare organizations for their own employees as much as 39% by 2020. Beginning in 2018, the Patient Protection and Affordable Care Act (ACA)  requires employer to pay 40% on the value of  high cost health plans. This tax on Cadillac plans is calculated as 40% of the portion of the plan that exceeds standards set by the ACA, therefore the implications are significant. Also to be considered by the employer, the tax is measured as a direct function of plan cost and a number of factors can drive excise-tax exposure. Truven Health Analytics estimates the cost of tax per members to be $452 per employee in 2018, $589 in 2019 and $660 in 2020 for active plans. For plans projected to pay the tax, average tax amount range from 4.9% to 5.2% of projected plan costs from 2018 to 2020. Overall, it is projected the PEPY tax cost across all health system plans will be 1.6%-2.0% of plan costs from 2018 to 2020. Employers still have time to plan and position their programs to alleviate the impact of the Cadillac tax in 2018 and afterwards. For more information visit www.hhs.gov/healthcare/rights/law/title/ix-revenue-provisions.pdf and look out for Cadillac Tax Part 2 on Thursday!

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