Beginning in 2018, the Patient Protection and Affordable Care Act imposes an excise tax on high-cost health plans.

In addition to being a way to raise revenue for the government, the reason for this provision is to reduce the demand for high-cost – or so-called Cadillac – plans, where the individual has little out-of-pocket cost. The point? To encourage employers, providers, and consumers to control health costs.

So the tax, in the simplest terms, penalizes companies that offer high-end health care plans to their employees.

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