Congress Further Delays Healthcare "Cadillac Tax"

An under-the-radar component of the legislation Congress passed on Jan. 22 to end the three-day government shutdown was a provision to delay implementation of the excise tax on high-cost employer health coverage (known as the "Cadillac tax") for an additional two years, until 2022.

The Cadillac tax was scheduled to take effect in 2018. It would have resulted in a 40 percent tax on the value of employer-sponsored health coverage that exceeds certain benefit thresholds. Estimates placed it at $10,800 for self-only coverage and $29,100 for family coverage in 2020. Although the name may imply the 40 percent tax applies only to a few individuals with "luxury" health coverage, it in fact extends much further.

If the tax were allowed to take effect, many employers would have been forced to adjust their employee benefits programs in a manner that would result in employees paying a greater share of their health costs out of pocket, such as:

  • Increasing deductibles and other cost sharing;
  • Eliminating covered services;
  • Capping or eliminating tax-preferred savings accounts like Flexible Spending Accounts (FSAs), Health Savings Accounts (HSAs), or Health Reimbursement Arrangements (HRAs);
  • Eliminating higher-cost health insurance options;
  • Using less expensive (often narrower) provider networks; or
  • Offering benefits through a private exchange (which can use the above tools to cap the value of plan choices to stay under the tax's thresholds).

The Alliance to Fight the 40, a coalition opposing the Cadillac tax of which NATSO is an active member, applauded Congress for delaying the Cadillac tax, saying in a statement that the tax would "compel employers to stop offering wellness programs and on-side clinics and to reluctantly ask employees to bear higher out-of-pocket costs. We will continue efforts to fully repeal this onerous tax and appreciate that Congress has passed this two year delay as a down payment for full repeal."

 

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David Fialkov

David Fialkov is the Vice President of Government Relations, as well as the Legislative and Regulatory Counsel, at NATSO. In this capacity, Mr. Fialkov direct's NATSO's legislative, regulatory, and legal strategy on a range of issues, including transportation, energy and fuels, labor, data security, and taxes. Mr. Fialkov also oversees NATSO's political engagement program, including individualized legal and political counsel to member companies. Prior to joining NATSO, Mr. Fialkov was the senior associate in the Government Affairs and Public Policy practice at the law firm of Steptoe and Johnson in Washington, D.C. At Steptoe, Mr. Fialkov advised clients on legislative, regulatory, and political issues, as well as legal concerns. His primary clients included trade associations representing the motor fuel wholesale and retail industries, including the National Association of Convenience Stores and the Society of Independent Gasoline Marketers of America. Mr. Fialkov's focus was not only on the motor fuels business, but also the litany of other issues that retailers confront, including labor matters, foodservice issues, healthcare and employment issues, tax matters and data security. Prior to joining Steptoe, Mr. Fialkov graduated with honors from George Washington University Law School. He received his B.S. Summa cum laude with highest honors from Clark University in Worcester, MA. He lives in Washington, D.C. with his wife Allison and daughter Lilah. More

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