“When the Affordable Care Act went into effect in 2010, the goal was to make it easier for Americans to get quality, cost-effective health care coverage,” says LIUNA General President Terry O’Sullivan. “Now a flawed provision of the Act is threatening the coverage of millions, including thousands of hard-working LIUNA members.”
That provision is called the excise tax, but it’s better known as the “Cadillac” tax.
What is the Cadillac tax?
In its simplest terms, the Cadillac tax is a penalty on employee health benefits that are valued over a certain level. The ACA sets this level at $10,200 for single coverage and $27,500 for family coverage. Any amount beyond this level is taxed at 40 percent.
What does this mean for signatory employers and LIUNA members?
Say a Laborer who is married and has two kids gets health coverage through his employer. Time for a little math problem:
$35,000 (estimated value of coverage)
– $27,500 (family coverage limit)
$7,500 (excess value)
x 40 percent (Cadillac tax)
$3,000 (bill to the employer for just this one employee)
Multiply this penalty by every covered employee and it’s easy to see why many businesses aren’t happy about the Cadillac tax.
Here’s why the Cadillac tax affects more than just employers.
The Cadillac tax leaves companies with two options: pay hefty penalties or reduce the coverage they offer. Faced with such large penalties, many employers are exploring alternatives to lower the value of their plans, such as raising deductibles or having employees pay a larger portion of their own health care costs through coinsurance or copays.
In short, the Cadillac tax punishes employers who are already doing the right thing by providing their employees with excellent, affordable health care. This doesn’t make much sense when the ACA’s stated goal is “improving access, affordability and quality in health care for Americans.”
Need one more reason to dislike the Cadillac tax?
The ACA limits of $10,200 and $27,500 are the same everywhere in the U.S. So if you live in a state where health care is expensive (such as California or New Jersey), your health benefits may have a higher dollar value, leading to a much bigger bill for your employer and the potential for a much larger drop in your coverage.
There’s one piece of good news about the Cadillac tax.
The tax isn’t scheduled to go into effect until 2020, which means there’s still time to fight it. LIUNA and the LHSFNA encourage all LIUNA members, signatory employers and affiliates to contact your representatives in Congress and the Senate and let them know that the Cadillac tax needs to be repealed.
Got more questions about the Affordable Care Act?
You can read more about the Cadillac tax on LIUNA’s website. The LHSFNA’s series of ACA Q&A brochures, available in our online Publications Catalogue, answer additional ACA-related questions of interest to Laborers, such as intermittent eligibility, pre-existing conditions and dependent coverage.