The Washington Post published an editorial Sunday defending the “Cadillac tax,” a part of the Affordable Care Act, in the face of a legislative effort to repeal it before it can even take effect.
The provision is an excise tax of 40 percent levied on employer-provided health-care plans with values over a certain threshold, which are all currently tax-exempt. The tax will affect individual plans exceeding $10,200 in value and family plans exceeding $27,500, with the thresholds indexed to inflation. If health-care costs continue to rise faster than inflation, the tax will be more noticeable over time. We’ve written previously about how the tax is an important tool to slow health care spending growth.
The editorial cites a report by the non-partisan Kaiser Family Foundation finding that a quarter of employers offer at least one plan that would be affected if no changes are made to their offerings. It is no surprise, then, that “unions, insurers, chambers of commerce and other interests will resist reduction in the subsidies they benefit from,” the paper comments.
As the editorial explains, the current tax subsidy for employer-sponsored health-care premiums causes employers to overspend on health-care at the expense of other forms of compensation: