January 27, 2016
By Michael Jordan
What the Cadillac Tax Delay Means for Labor
The $1.1 trillion budget deal approved by Congress on Dec. 18, 2015, delays the Cadillac tax for two years – from 2018 to 2020 – and raises the possibility of a repeal. In this issue of the Labor Bulletin, we’ll examine what this means for labor unions.
The Cadillac tax imposes a 40 percent excise tax on the portion of group health plan premiums that exceed $10,200 for single coverage and $27,500 for family coverage under the Patient Protection and Affordable Care Act. Opponents hail the delay as a win for labor unions, which have aggressively lobbied to repeal of the excise tax. Thresholds for individuals in multiemployer plans are based on the family threshold.
Labor organizers object to the tax because they say union members have given up wage increases for many years in exchange for preserving health benefits — and that they were unlikely to get higher wages in return for benefit cuts.
Cadillac Tax: Down but Not Out
The Cadillac Tax delay comes as a relief to many unions, but it also has major ramifications for the future of the Affordable Care Act (ACA) in terms of funding. Stakeholders should watch and wait to see how changes unfold.
Barring repeal, union organizations should take note that potentially high risk professions as defined by the government — construction, longshoremen, mining, agriculture, forestry, fishing, law enforcement, fire and EMTs, including retirees with 20+ years – could experience some relief in 2020 because the Cadillac tax thresholds are slightly higher at $11,850 for an individual and $30,950 for a family.
The tax applies to every dollar of cost above these thresholds with the aim to reduce the impact and amount of tax-free benefits provided to members, and to encourage cost-conscious shopping for plans with more limited benefits. Unfortunately, this tax will also impact many members of Taft-Hartley health and welfare plans, as well as members in typically generous government employee benefit plans.
Benefits experts claim the delay will not stem the proactive steps many labor organizations have already put into place to avoid triggering the excise tax, such as increasing deductible levels and out-of-pocket maximums to bring plan premiums below the thresholds.
Lobbying efforts against the “Cadillac tax” are expected to continue. Labor will is likely to maintain its position that, while the ACA has helped to expand coverage, much more needs to be done in the name of quality, affordable healthcare, such as expanding Medicaid for low-income workers in every state and making changes to protect health coverage for workers. The good news is that all major presidential candidates oppose the Cadillac tax.
Inside Healthcare with MagnaCare President Michael Jordan Click here to view Michael’s video on what the Cadillac tax delay means for labor.
Business Insurance; 2015; http://bit.ly/22l12qr