Affordable Care Act’s Cadillac Tax on High Cost Health Plans has been Delayed Two Years

The Affordable Care Act (ACA) (a/k/a “Obama Care”) contains a provision that would impose a 40% non-deductible tax on higher cost health plans. The tax was scheduled to go into effect in 2018 on plans whose total annual cost exceeds $10,200 for individual and $27,500 for family coverage. Insurances carriers would be responsible for paying the tax but the burden ultimately would fall on employers and individuals with high cost plans. The Kaiser Foundation predicts that by 2018 26% of employers would be assessed the Cadillac Tax on at least one of their health plans if plan design remains the same. This is why many employers have indicated a reluctance to agree to any collective bargaining agreement beyond 2018.

In December, the U.S. House of Representatives released a tax bill entitled “Protecting Americans from Tax Hikes Act of 2015.” The bill was ultimately passed by Congress and signed into law by the President. It delays implementation of the Cadillac Tax until 2020. Analysts speculate whether the tax will ultimately be repealed before it goes into effect.

Accordingly, employers may no longer rely on the Cadillac Tax to avoid negotiating agreements that extend beyond 2018. It is likely that they will continue to be reluctant to any agreements extending beyond 2020 when the tax currently is due to take effect.