At Work

The 40% Cadillac tax trap

Long before Obamacare employers were shifting health plan costs to workers and providing flexible spending accounts (FSA) to help offset that shift. In recent years high deductible health plans have gone even further in making the employee pay a greater portion of health care. In this case the health savings account (HSA) is the vehicle to ease the pain. Both the FSA and HSA are funded with pre-tax contributions.

When the Cadillac tax comes along in 2018 employers will seek to avoid the new tax by lowering the value of the health plan even further. But workers can use the FSA and HSA to again ease the burden.

WRONG‼️

You see, pre-tax contributions to these plans are included in the calculation for the value of health plans subject to the tax. As a result, your basic benefits will still go down, your employer will cutback on any contribution to your HSA and your contribution to either an HSA or FSA may be limited to avoid triggering the Obamacare tax.

imageNot worry though. The expert economists promoting the tax are convinced you will be a better health care consumer and thus spend less and they are also convinced that your employer will make up some of your lost benefits by giving you a raise. 😜

Ain’t it great to be an expert❓ Hey, there is more good news. Since many of these economists work for state universities and colleges that offer some of the most generous benefits, they will expect a raise too … ah, any impact on the tuition you will pay for your kids?

Here is what is included in calculating the value of a health plan

Insured and self-insured group health plans (including behavioral, and prescription drug coverage)

Wellness programs that are group health plans (most wellness programs)

Health Flexible Spending Accounts (FSAs)

Health Savings Accounts (HSAs), employer and employee pre-tax contributions

Health Reimbursement Accounts (HRAs)

Archer Medical Savings Accounts (MSAs), all pre-tax contributions

On-site medical clinics providing more than de minimis care

Executive Physical Programs

Pre-tax coverage for a specified disease or illness

Hospital indemnity or other fixed indemnity insurance

Federal/State/Local government-sponsored plans for its employees

Retiree coverage

Multi-employer (Taft-Hartley) plans

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2 replies »

  1. No, not every university will be interested in both paying for health coverage AND shouldering the cost of the Cadillac Tax.

    More importantly, where employers get resistance from public employers and/or represented employees, look for them to shift from a DB to a DC or Defined Dollar mode – “here is what we will spend, nothing more, nothing less”.

    The irony is quite significant – since almost all university professors, and probably most university staff all voted for President Obama (twice)!!!

    http://www.nytimes.com/2015/01/06/us/health-care-fixes-backed-by-harvards-experts-now-roil-its-faculty.html

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