One feature of the Patient Protection and Affordable Care Act (PPACA) that didn't receive much attention when the PPACA first went into effect in 2010, but that is now becoming of significant concern to most employers, unions, and employees, is the "Cadillac tax."
The "Cadillac tax" is a 40 percent excise tax on employer-provided health insurance plan premiums that exceed $10,200 for individuals and $27,500 for families. The original idea of the tax was to act as incentive to employers to avoid high-cost plans. And, as originally designed, the tax was expected to be able to generate about $87 billion over ten years to help fund the PPACA, and also drive down the costs of health insurance by urging employers to be more cost-sensitive to the benefits that they offer to their employees.
However, according to the National Federation of Independent Business (NFIB), the "Cadillac tax" is likely to have a greater impact on small businesses and their employees than on large businesses and their employees. "Small businesses typically pay upward of 18 percent more than others for health insurance," noted the NFIB in a May 21 press release. In addition, "The tax is indexed for general inflation, not healthcare costs, so, as health costs continue to rise, more people will be forced to pay this tax each year."
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