Tax on 'Cadillac' plans hits middle class
Millions of Americans are expected to buy health insurance for the first time to avoid the penalties for not having insurance under health care reform's "individual mandate" that takes effect in January. Meanwhile, some employers are already scaling back their group health plans to avoid a 40 percent excise tax on high-cost, or "Cadillac," plans that doesn't take effect until 2018.
The tax will hit individual plans costing more than $10,200 and family coverage costing more than $27,500 annually. A Washington, D.C.-based think tank, the Economic Policy Institute, has criticized the tax as "not well-targeted" because it's likely to impact many unsuspecting workers with rather ordinary health plans that happen to cost a lot because of company size, job location and other factors.
The institute says the tax creates a strong incentive for employers to move toward cheaper and less-generous coverage that shifts more costs onto workers.
Watts says "about a third" of companies are making corrections now to keep their "Cadillac" plans out of the ditch, with most moving toward "consumer-driven" platforms in which employees are given a fixed sum and allowed to shop for their best health and benefits fit.