Wednesday, April 27, 2016

ICYMI: Health Affairs Blog Cautions Implementing the “Cadillac Tax”

ICYMI: Health Affairs Blog Profiles Problems with the “Cadillac Tax”


“About That Cadillac Tax,” an April 25 Health Affairs Blog post by Jeff Lemieux and Chad Moutray, highlights two serious problems with the 40% tax on health benefits:


“There are two key practical issues with the tax: the indexing problem and the adaptation question. In our opinion, these are serious enough issues to warrant continued caution before implementing the Cadillac tax.”



First, the tax threshold amounts are indexed to the Consumer Price Index (CPI). With health care costs rising faster than CPI, every year more and more health plans will be subject to the tax. The second problem is how employers prepare for the tax, by cutting benefits and moving to higher deductible plans, which ultimately means workers will bear the cost of the tax.


The authors “worry the tax will cause employers to continue to shift costs to beneficiaries through higher and higher deductibles.” 


In addition, the two economists fear “even the most innovative firms could struggle to find alternative ways to cut costs quickly enough to avoid the tax, and might have to default to continuously higher deductibles. Overly high deductibles, in turn, could become clinically inefficient. That is ever-higher deductibles could lead to the delay or avoidance of appropriate and necessary health care for too many patients, especially those with low incomes. In those cases, the deductibles could cause reductions in health status sufficient to raise overall or long-term health costs, not lower them.”


To view the Health Affairs Blog post, click here.




The Alliance to Fight the 40 is a broad-based coalition comprised of public and private sector employer organizations, consumer groups, patient advocates, unions, health care companies, businesses and other stakeholders that support employer-sponsored health coverage. This coverage is the backbone of our health care system and protects over 175 million Americans across the United States. The Alliance seeks to repeal the 40% tax on employee health benefits to ensure that employer-sponsored coverage remains an effective and affordable option for working Americans and their families.