Cadillac Tax To Be Delayed, But Not Dead

Jamie Scott

The Affordable Care Act includes a nondeductible 40% excise tax on high-cost health plans that is scheduled to become effective in 2018.  This provision has been called the Cadillac Tax, but it did not take long for everyone to realize that future premium increases would quickly result in the Cadillac Tax applying to most health plans.  A recent study by the Kaiser Family Foundation estimates that the Cadillac Tax would apply immediately to plans maintained by 26% of all employers and that percentage would increase to 42% by the year 2028.  

Interest groups as diverse as the Chamber of Commerce and many unions have been putting pressure on Congress to do something about the Cadillac Tax.  Now Congress is about to act.   As part of the appropriations deal negotiated by House Speaker Ryan and expected to be passed by Congress in the next day or so, the Cadillac Tax will be delayed to 2020, and Cadillac Tax payments made in the future will be deductible.   

Employers and unions are hoping that the two- year delay will give Congress time to figure out a way to finally kill the Cadillac Tax.  But for now, while it is under attack, it is still alive.