Cadillac Tax, Subsidies Case Loom Large Over ACA and Employers, Practitioners Say


If the Affordable Care Act's 40 percent excise tax on high-cost health plans goes into effect in 2018 as planned, it could have a detrimental impact on health-care benefits, practitioners at a conference said.
The tax—often referred to as the Cadillac tax—is the biggest issue facing multiemployer health plans, John D. Abraham, co-director of the Center for Workers' Benefits and Capital Strategies at the American Federation of Teachers, said May 4.

If the tax is fully implemented in 2018, it will “significantly harm employer-provided insurance” and because of that, his group is fighting against the tax, Abraham said during a session of the International Foundation of Employee Benefit Plans Washington Legislative Update. 

Currently, there are a few things unions can do regarding the tax, including re-engaging with their “joint committees” to see what their current premiums are and to project what their premiums will be in 2018, Abraham said. That way, unions can figure out if they have to take action immediately to avoid triggering the tax, he said.

Abraham said the AFT is telling local unions that if they think they are going to go above the tax's thresholds, “they need to start seriously considering cost-containment initiatives now,” he said. That includes considering implementing wellness programs, he said.

Exchange Subsidies

When it comes to the latest ACA-related case being considered by the U.S. Supreme Court, the outcome of King v. Burwell could go a number of different ways, said Kathryn L. Bakich, senior vice president, national health compliance practice leader at the Segal Co.

The case involves a legal challenge to an Internal Revenue Service rule allowing people getting health-care coverage through the federally facilitated ACA exchanges, or marketplaces, to get tax subsidies to help pay for the coverage. The court is expected to rule on the case in June.

The court could rule that the statute is a little ambiguous and that the Treasury Department has jurisdiction to interpret the statute the way that it wants, which means tax credits would be available for coverage in the federally facilitated exchanges, she said.

States’ rights also could affect the court's ruling, which would also end with participants receiving subsidies, Bakich said.

“The argument would be that if you only allow subsidies in states that ran their own exchanges and didn't allow subsidies to the people that live in states that don't, then that is impermissibly coercing the states to set up exchanges. And so that interpretation would fail and you would have to allow subsidies in every state,” she said.

Excerpted from a story that ran in Pension & Benefits Daily (05/05/2015).

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