ACA High-Cost Excise Tax

The threat of the excise tax on high-cost health care plans after 2017 is driving employers to fundamentally reassess their plans and reconsider what their role and approach to providing health care benefits should be in the future. At the moment, the tax is acting as a catalyst for change. At some point in the future, however, continued medical inflation and regional differences in health care costs will make it very difficult for employers to continue reducing benefit costs to avoid the tax. Policymakers should recognize the cost of employer-provided care is increasing for a variety of reasons beyond the control of employers and employees, including the aging workforce, new medical technologies and drug therapies; and new taxes, fees and compliance burdens imposed by the ACA. This combination of forces makes it more difficult for employers to provide affordable health care benefits to employees with each passing year, and the inexorable increase in health care costs will eventually cause a Chevrolet benefit plan to be taxed as a Cadillac. That in turn will result in the burden of the excise tax to fall on a significant number of American employees and their families.