Looking Under the Hood of the Cadillac Tax
<p>Although the Affordable Care Act’s “Cadillac tax” on high-cost employer health plans won’t take effect until 2020, it remains controversial—mainly because it will undo part of the existing federal tax preference for employer-sponsored insurance.</p><p>But in a new Commonwealth Fund issue brief, Sherry Glied of New York University and Adam Striar of Manatt Health Solutions report that the tax will likely be more progressive than prior analyses have suggested, while reducing total health spending only modestly.</p>
<p>The authors say that’s because the formula for determining who is subject to the tax includes tax-favored health savings accounts (HSAs) and other health savings vehicles—which are used by high-wage earners the most. At least initially then, employers are more likely to limit their contributions to these savings accounts rather than increase employees’ cost-sharing responsibilities for their health care. </p>