There’s nothing worse than being tricked. That’s exactly what the so-called “Cadillac tax” is: a deceptively named trick that will utterly destroy what is left of America’s private employer-based insurance market.
During the run-up to the passage of the Affordable Care Act, the Cadillac tax was hailed as an amazing Robin Hood scheme. It would supposedly take money from those evil rich people who had somehow managed to garner exorbitantly fancy health insurance for themselves and sprinkle that cash around to everyone else.
Like most political promises, the plan falls flat under closer examination.
Rather than targeting the rich, the Cadillac tax – which is scheduled to take effect in 2020 – will be a blow to almost every single American who receives health insurance through an employer. In total, as many as 177 million Americans stand to pay more for their health coverage, face reduced benefits, or both.
The Cadillac tax will hit Utah harder than almost any other state in the nation.
A stunning 59 percent of the Beehive State’s population relies on employer-based health insurance for their coverage – only New Hampshire has a higher percentage of residents served by workplace health insurance than Utah. In total, 1.8 million Utahns’ health insurance may be in jeopardy thanks to the Cadillac tax.
When the hammer drops in 2020, health insurance plans valued at more than $10,800 for individuals and $29,100 for a family will trigger a 40 percent tax paid by employers. Those figures don’t account for the difference in health care costs in different areas. Utah happens to be a “high-cost” state where health care, in general, happens to cost more than other areas of the country. And since the threshold for the tax doesn’t increase based on health care inflation, more and more insurance plans will fall subject to the tax every year.
In fact, the Cadillac tax will cost American families an average of $5,000 over 10 years due to higher premiums, according to Marilyn Tavenner, the former head of Medicare.
Lower-income Utahns will be hurt the most by the Cadillac tax. The working poor will see higher deductibles, less coverage and diminished networks from which to choose doctors. Middle-class workers with employer-based plans will pay higher premiums for worse coverage. In fact, this is already happening in anticipation of the tax.
Employers depend on a healthy and productive workforce to keep their businesses thriving. Many offer on-site medical clinics, employee assistance and wellness programs to keep their employees healthy and control costs. These programs are in jeopardy because of the Cadillac tax.
Everyone loses as a result of this poorly designed tax. Large Utah employers like Delta, Costco, Vivint, Pure Storage, Marriott, Fleming’s Steakhouse, 1-800 Contacts, Supplemental Health Care, Coldwell Banker and Ancestry.com will inevitably see harm from the Cadillac tax. Small and public employers will be hit as well—including teachers, firefighters and law enforcement officers. All employers will be forced to respond to the tax with higher prices for their customers and worse health coverage for their employees.
Contrary to what a few lawmakers and bureaucrats think, no one should be punished for having a health insurance policy that provides affordable access to a range of doctors and services.
The Cadillac tax must be stopped before it harms countless Utahns who depend upon their employer-based health insurance. The solution lies with our elected officials: Congress must pass legislation to repeal this horrific tax and get it on President Trump’s desk as soon as possible.
Michael Melendez is director of policy at Libertas Institute, a public policy think tank in Utah. Drew Johnson is senior scholar at the Taxpayers Protection Alliance.