On December 20, 2019, the President signed legislation repealing the excise tax, otherwise known as the “Cadillac tax,” on high cost health insurance plans. Both houses of Congress had adopted the legislation the day before, as part of a federal spending package.
The excise tax was a component of the Affordable Care Act (ACA). Without the repeal, the excise tax would have resulted in a 40% levy on health insurance plan costs in excess of the dollar thresholds established in the ACA ($10,200 for individual coverage and $27,500 for family coverage, subject to future indexing). Following prior delays in the implementation of the tax, the tax was slated to go into effect in 2022.
Many employers had acted to address the potential effects of the excise tax during the past several years. For example, numerous employers negotiated into their collective bargaining agreements provisions for a “reopener” of the insurance provisions in those contracts, in the event of the triggering of the excise tax on the employers’ health insurance plans. To the extent that those provisions are specifically addressed to the ACA excise tax, those provisions will become obsolete as a result of the repeal of the tax.
While employers will, of course, continue to face substantial challenges in addressing the ever-increasing costs of health insurance, the repeal provides some welcome news in eliminating a potentially staggering tax. For further information regarding the repeal of the excise tax, please contact Richard A. Mills at rmills@goodwin.com or 860-251-5706.