The “Cadillac Tax” : What we still don’t know about it

Regulating guidance is slow in coming regarding the “Cadillac Tax” that is slated to become effective in 2018. The “Cadillac Tax” is a 40% excise tax on health plans that exceed $10,200 for single coverage and $27,500 for family coverage. The plan is to be paid by insurers, and in the case of self-insured employers, by the third party administrators who will almost certainly pass the tax along to employers.

While this all seems fairly simple, many issues still need regulatory guidance. Some of these include:

  • Should employee’s pre-tax contributions to HSA and self-insured dental and vision plans be included in calculating the cost?
  • Should the excise tax trigger be adjusted to reflect geographic cost differences?
  • Should the trigger be adjusted to reflect the 2018 cost of insurance? Health inflation has risen since 2010, at an average rate of 3-4% annually.
  • How would the tax be allocated if self-funded plan uses more than one TPA or ASO?
  • How would excise tax apply to employers who offer more than two tiers of coverage; such as employee plus one, employee plus spouse, employee plus child(ren)?
  • Will administrative costs, such as fees that self-funded employers pay for the TPA, be included in calculating the cost?

Some experts predict that some guidance will be forthcoming this year, while others feel that the IRS is stalling until they issue updated rules to replace non-discrimination rules for self-funded health plans.

Keep an eye out for any updates. Stop Loss Insurance Brokers, Inc. will be sure to update you with any new information as soon as it is released.

From Business Insurance January 19, 2015 “Uncertainties remain on reform law rules”