Even if the Affordable Care Act is ultimately repealed, the law’s so-called “Cadillac tax” on high-cost health care plans has already affected employers’ health insurance offerings, says Richard L. Kaplan, the Peer and Sarah Pedersen of Law at Illinois. Photo by L. Brian Stauffer
CHAMPAIGN, Ill. — A new paper from a University of Illinois tax expert says the Affordable Care Act's "Cadillac tax" has the potential to alter the landscape of the U.S. health insurance market and lead to the widespread adoption of a policy championed by former President George W. Bush - namely, health saving accounts. Even if President's Obama's signature health care law is ultimately repealed, the Cadillac tax has already affected employers' health insurance offerings, said Richard L. Kaplan , the Peer and Sarah Pedersen Professor of Law at Illinois. "The tax, which isn't scheduled to take effect until 2020, was enacted to fulfill two related but distinct purposes: to raise revenue to offset the subsidies the Affordable Care Act provides to low-income people who buy health insurance on the open market, and to discourage employers from providing particularly generous health insurance plans with low or no deductibles and minimal co-pays," Kaplan said. These plans exist because the tax code subsidizes employer-provided health insurance, thereby encouraging employees to trade a higher salary for first-dollar coverage on health insurance. "Such insurance is very expensive, but employers can deduct the premiums while employees need not report this benefit as income," Kaplan said. "The Cadillac tax was aimed at curbing this sort of compensation, which some argue leads to wasteful spending and overconsumption of health services." Employers have been shifting more of the health care burden to employees "for years now," Kaplan said.
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