They changed the tires, tweaked the engine and added some leg room, but at the end of the day, the new and improved 2010 Cadillac tax that emerged from negotiations between the White House, Congressional leaders and labor unions still has the features that made the 2009 model an attractive financing option.
The details of the revised excise tax on high-premium plans are as follows:
The threshold: The level of premium above which a 40 percent excise would be imposed is raised from $23,000 to $24,000 for family plans, and from $8,500 to $8,900 for individuals. Certain high cost industries or high risk industries (i.e. mining) would be subject to a higher threshold.
The start date: Originally scheduled for 2013, the tax won’t take effect until 2018 for some collective bargaining agreements. Starting in 2015, dental and vision plans would also be phased out from the total cost of coverage (so employers would have less incentive to drop them -- this provision is aimed at efficiency, not taking away vision and dental coverage).
The bottom line: With the changes, the provision is expected to generate about 40 percent less revenue in the first 10 years -- about $90 billion total. That’s revenue that will have to be made up elsewhere (possibly with changes to the Medicare payroll tax). However, the threshold will continue to be indexed at inflation plus 1 percent -- one of the key features of the tax which helps it bend the health care cost curve.
For more on the potential impact of the excise tax, click here.
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