Gearing up for "Cadillac tax".

AuthorBrainerd, Jackson
PositionTRENDS - Brief article

States are looking ahead at the so-called "Cadillac tax" on high-cost, employer-sponsored health coverage, originally scheduled to begin in 2018. It's scheduled to be an annual 40 percent tax on insurers for premiums above a certain threshold. Revenues will help pay for health care reform. The tax is intended to also combat rising health care costs by encouraging employers to offer more cost-effective plans, shifting some risk to employees and eliminating the current unlimited exclusion of employer-based health insurance coverage from taxes.

Most public sector employees have insurance plans that will be subject to the tax in 2018. The tax will apply to approximately 31 percent of all active employee plans in its first year and gradually extend to more plans over time. It's estimated that 70 percent of all active employee plans will be subject to the tax by 2027.

Kathy Schwappach, from the benefits consulting firm Segal, told a group of lawmakers in October that a side effect of the tax is a "nightmare for employers offering good plans to their employees." Although the tax falls on insurance companies, Schwappach is sure "it will come back to employers in...

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