Director, Policy Futures
Update, September 30: we’ve updated this post to reflect a new estimate of the cost of repealing the excise tax.
The House will soon consider budget reconciliation legislation that includes a provision, approved by the Ways and Means Committee, to repeal health reform’s excise tax on high-cost health plans (the so-called “Cadillac tax”). But the tax has a strong policy rationale, and repealing it would be unwise.
Health reform imposes an excise tax of 40 percent on the value of employer-sponsored health plans that exceeds $10,200 for individuals and $27,500 for families, starting in 2018. (Higher dollar limits apply in certain cases.) The thresholds will rise in tandem with the consumer price index (CPI) plus one percentage point in 2019 and with the CPI thereafter.
Some changes to the tax deserve consideration. For example, unless the thresholds rise more rapidly than the CPI, the tax will eventually affect too large a share of health plans. But the tax’s basic concept is sound, and immediate changes aren’t required. Here are four reasons why: