State Officials Praise Decision To Delay Health Care 'Cadillac' Tax Till 2020

Dec 21, 2015

Last week, Congress delayed the imposition of a tax on expensive health care policies. Vermont state officials praised the move, but warned the tax will take effect eventually.

It's known as the "Cadillac" tax because it imposes a 40 percent levy on higher end health care policies. These policies are more expensive because they usually contain low deductibles and low out of pocket caps.

Backers of the tax believe these types of policies often drive up use of the health care system because consumers don't pay a financial penalty if they seek treatment.

The tax is part of the Affordable Care Act and would be imposed on employers.

It was set to go into place in 2018 but has now been delayed until 2020.

Darren Allen is the communications director for Vermont NEA, the state teacher's union whose benefits include high-end health plans. Allen says the two-year delay is very good news.

"This looming excise tax really was going to force a lot of changes,” Allen said. “[It] was going to cost a lot of money to very many employers, public and private, so to have a few more years to see how the ACA shakes out in its other aspects makes sense to us."

The Cadillac tax would apply to all individual policies that cost more than $10,200 and family plans that cost more than $27,500.

Allen says the delay is timely because a number of school boards were already discussing how to deal with the tax in their local contract negotiations.

"I think if Congress was going to get rid of the Cadillac tax they would have done so now." - Lawrence Miller, chief of health care reform

"How that looks, how much of the tax would have been borne by the school districts and how much would have been borne by our members is a subject of negotiation,” Allen explained.

Lawrence Miller is the chief of health care reform in the Shumlin Administration. Miller says it's important to realize that Congress delayed this tax and did not repeal it.

“I think if Congress was going to get rid of the Cadillac tax they would have done so now,” Miller said. “People really should do the work to be prepared and not assume that this is an indicator that it is going to get eliminated later."  

Miller says the delay places an even higher priority on cost containment efforts being developed by the administration and the Green Mountain Care Board.

"I think all of the health care providers are also keenly aware that the sector cannot continue to grow faster than the rest of the economy,” Miller said.

In its legislation last week, Congress also delayed two other revenue sources for the Affordable Care Act.

Despite this action, Miller seriously doubts that federal subsidies that are available to reduce premiums will be reduced by Congress in the coming years.