The Affordable Care act creates Section 4980(I) of the tax code, often referred to as the Cadillac Tax. Scheduled to go into effect in 2018, the Cadillac Tax is a 40% excise tax on high valued health plans, those with premiums above a certain pre-determine threshold. It would affect all plans, whether purchased in the individual, small group, or large group market.
There’s currently a lot of talk about repealing the Cadillac tax, which would cause premiums to increase even more quickly than they are right now and could be harmful to tax-advantaged accounts like FSAs, HRAs, and HSAs. However, lawmakers haven’t yet figured out how to replace the $90 billion in revenue that would be lost if the tax were eliminated.
Assuming the Cadillac tax does stick around, we’ll certainly be talking about it more in the months to come. In the meantime, we wanted to pass on a great fact sheet developed by Cigna about the Cadillac Tax. It’s very thorough yet easy to read. Download it here.