If the Supreme Court doesn't gut Obamacare subsidies, and if we don't have a Republican sweep of Congress and the White House in 2016, and if Obamacare is
not fully repealed or substantially hollowed out by 2018, one of the most controversial aspects of it will finally be enacted. That's the so-called
"Cadillac" tax on high-value, employer-sponsored health insurance plans—the first income tax levied on employer-based plans and already the cause of some employers to start scaling back plans or making employees pick up more of the share of their coverage. It's an excise tax on the health benefits companies provide their workers above a certain threshold—$10,200 for individual coverage and $27,500 for self and spouse or family coverage. Any amount over those caps will be subject to a 40 percent tax, paid by the insurers—the employer or sponsors of self-funded group health plans. Those thresholds are indexed to inflation, and the tax is expected to raise
$87 billion from 2018-25. That will basically pay for all of the federal subsidies for people buying on the exchanges in the individual market.
The tax that was controversial in 2010 is still controversial, in both parties, and is shaping up to be one of the biggest policy debates of the next three years, barring total disaster for the law.
"This is going to have a life of its own as the clock ticks closer to 2018," said Rep. Joe Courtney (D-Conn.), a critic of the tax.
Though the nickname suggests it will apply to a select few, experts say a majority of employers could eventually face the prospect of imposing what will be the first-ever tax on health care benefits. […]
[T]he tax is more onerous than it appears, experts say, in part because it hits more than just traditional health insurance.
It also applies to health savings and flexible spending accounts, including money workers now sock away tax-free for medical expenses. Supplemental insurance plans will also be included and, potentially, on-site clinics companies set up for their workers, the IRS said last month.
About one-third of employers will be hit by the tax in 2018 if they do nothing to change their plans, according to a March survey by Mercer, a benefits consulting firm. By 2022, almost 60 percent will be facing the levy.
Employers have already started shifting some of their costs to employees to try to avoid the tax and are attempting to make up the difference by offering the flexible savings and spending accounts, which isn't much of a help since those accounts will also be subject to the tax. Another big issue for critics of the tax is that it doesn't just apply to "gold-plated" insurance policies. Insurance rates are high—and high enough to qualify under the "Cadillac" caps—in many geographical regions and also because of the health status, age, and gender of the workforce covered by the plan as well as enrollees' work industry.
Even if the rest of the law survives under sustained Republican assault, you can expect this part of it to be hotly debated, and possibly changed (if Republicans can get around to doing anything other than repeal votes) in the next few years. There's definitely room for some tweaking of it—the fact that Obamacare spending is coming in so much lower than originally projected and that it is slowing down the rate of increase in health spending makes it that much easier.