A request I received via PM:
I was wondering if you could add a portion about the "cadillac plan fines" much talked about. These are the excellent health care plans at very low cost to employees that the ACA feels should be fined out of existence unless you get an exemption from a the administration.
What affect does the ACA have for someone with such a plan.
The ACA defines a "Cadillac" plan as one with individual premiums in excess of $10,200 annually ($850/month) or family premiums in excess of $27,500 annually (~$2,292/month)
before the employer pays any portion, for calendar year 2018. These plans often have very low deductibles and copay/coinsurance as a result of the high premiums.
Congress believes that these "Cadillac" plans encourage over-use of medical care since the patient is out-of-pocket very little (employers who offer "Cadillac" plans often pay 90+% of the monthly premium) and that this over-use drives up medical costs for everybody.
As a result, the ACA has enacted a funding provision (Section 9001(a)) which taxes these plans. The tax is 40% of the premium in excess of the "Cadillac" definition.
Example: A single person with an annual, before subsidy, premium of $15,000 will trigger a "Cadillac" tax of $1,920 [($15,000 - $10,200) x 40%].
If the "Cadillac" tax is trigger solely by the premiums (like in my example) then the tax must be paid by the
insurance company. If the "Cadillac" tax is triggered by HSA/MSA contributions made by the employer then the tax must be paid by the
employer. If the employer self-insures (which most large employers do) and uses a TPA to administer the plan then the tax must be paid by the
TPA.
Two notes:
1) There is a built-in escalator to the Cadillac threshold whereby if the federal BCBS plan premium increases by more then 55% between 2010 and 2018 then the "Cadillac" threshold is automatically bumped up to compensate; and
2) After 2018 the "Cadillac" threshold is pegged to IRC4980(I)(1)(f)(iii) COLA in $50 increments.