Jay wrote:
Part of the memo from our CEO today:
E. “Cadillac Plan” Tax
This is an early notification about pending legislation that is scheduled to become effective
in 2018. As part of the Patient Protection and Affordable Care Act “PPACA” (Obamacare),
the Internal Revenue Service intends to impose a 40% penalty tax for plans where the
employer costs of health insurance plans exceeds minimum threshold amounts that are
established by the Federal government. Essentially, employers will be penalized for offering
health care plans that are too rich in benefits, hence the name “Cadillac Tax”. Yes you read
that correctly! And based on our current contributions with expected increases between now
and 2018, we have been advised that the cost to LORING for having similar benefits to our
existing plans would result in a penalty tax of over $200,000 per year. Obviously, this
magnitude of cost is untenable and we will be forced to limit benefits to avoid this penalty.
The point in giving you this early information is to advise you of critical dynamics that will
modify health care plans as we presently know them. Taking a proactive approach to
managing costs now will enable us to control our ultimate exposure as we look several years
down the road, to ensure that LORING can continue to provide our employees with quality
healthcare at manageable costs for both the firm and the employees.
Thanks Obama!
Wow your CEO is wrong and/or an idiot. Cadillac tax is imposed on the insurer, not the employer. It's for plans that exceed the MAXIMUM threshold. I wonder if they sought outside consultation for this or he's just doing back of the envelope math? The fact he keeps saying things like "employers will be penalized" and "existing plans would result in a penalty tax of over $200K/year" leads me to believe he hasn't or he is being willfully ignorant. How can your employer predict what charges the insurance provider is going to pass on to your company?
The Cadillac tax has it's pros and cons. On one hand, taxing insurers who offer businesses high value health benefits seems a little silly just on the face of it. It's supposedly to deter misuse of high-end plans (which in theory end up causing rates to increase across the board for all health services), but it just seems like a tax on the wealthy. On the other hand, the threshold for tax is plans that offer more than $10,200 in coverage for a single year. That's $850/month in health benefits. Even the platinum coverage my employer offers doesn't meet that threshold (I am looking at the plans as I type this, seeing as we are redoing our plan due to high usage rate over the course of the last year - incidentally something the Cadillac Tax seeks to limit). For a family, the threshold is $2,291/month, or $27,500 per year. Essentially your employer is providing anywhere from $850-$2300/month in extra income to every employee, but is complaining that because of the tax they will be forced to pay $200K/year TOTAL as a result of increased healthcare costs? Seems like a dubious argument at best.
It sounds more like the company wants to scale back their benefits package and are using the oncoming Cadillac Tax (remember, this doesn't happen until 2018!) as an excuse. "We will be paying $200K a year in tax 2.5 years from now, so we need to reduce costs now! Tsk tsk, John G@lt employer.
Insurers, knowing that if they put together healthplans options that are over the maximum threshold they won't be accepted by an overwhelming majority of employers because of the tax, are incentivized to put together plans that fall just under the threshold. Won't this result in more affordable and complete coverage for everyone?
It's kind of silly that the government both subsidizes premiums AND taxes Cadillac Plans. There's got to be a more efficient way to do this.
Read here for more:
http://www.latimes.com/business/hiltzik … olumn.htmlTHANKS OBAMA!
