AFSCME District Council 36

Tax Threat on Health Plans Postponed

By Lenny Potash Feb. 2016

In an unusual show of bi-partisan action, one of the last acts of Congress in 2015 was to postpone to 2020 the implementation of the Excise (“Cadillac”) tax on good health plans that is part of the Affordable Care Act (ACA). The Congressional action was included in the omnibus spending deal known as the Consolidated Appropriations Act, 2016. The tax scheduled to take effect in 2018 was already exerting pressure on employers to degrade plans in an effort to lower the overall costs and avoid the 40% tax on plan costs above a certain threshold. (See “Will Looming Tax Threaten Decent Health Plans?”)

Although President Obama did not favor the tax postponement, which is estimated to cost the government $9 billion, the compromise Appropriations Act was signed into law.

The ACA Excise tax would initially affect 1 in 4 plans that exceed the threshold but according to the Kaiser Family Foundation, because of the continuing increase in healthcare costs, many more plans would be subjected to the tax each year.

The AFL-CIO believes that despite the two year postponement companies will continue to cut benefits in anticipation of a 2020 tax. It's clear that the tax was not only intended to bring in revenue to fund ACA programs but also to reign in high priced insurance plans and replace them with less costly plans that have fewer benefits, narrower networks, and/or higher deductibles and co-pays.. Organized labor and many others want the tax repealed.

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