So-called “Cadillac” Tax to Hit Paychecks in 2018

You may not have heard of the 40 percent benefits tax, also known as the “Cadillac” tax, but it’s a penalty built into the Affordable Care Act (ACA) that will take effect in 2018. LIUNA and others are working hard to get Congress to repeal the benefits tax because it could destroy the health and welfare funds of millions of workers, including LIUNA members.

Under the ACA as it currently stands, if a health plan’s annual cost exceeds $10,200 for one person or $27,500 for a family, it will be subject to a penalty starting in 2018. That penalty – for the crime of enrolling in quality insurance – is a 40 percent benefits tax.

The tax was intended to discourage overly generous and unnecessary plans for corporate executives. But like other provisions of the ACA, there are unintended consequences on all workers, with union members taking the brunt of it.

As insurance premiums continue to rise, the Towers Watson human resources consulting firm projects that 48 percent of all plans will be hit by the tax when it is implemented and that will rise to 82 percent five years later – unless benefits and the quality of care are slashed or the plans shut down entirely. Because LIUNA members and other union workers have struggled and sacrificed for years to build quality healthcare plans, ours will likely be “totaled” much sooner.

There’s reason to be cautiously hopeful Congress could act in time. Two bills in the U.S. House of Representatives– one championed by Democratic Rep. Joe Courtney of Connecticut and one by Republican Rep. Frank Guinta of New Hampshire – would repeal the tax. Both are gathering bipartisan support and between the two measures, there are now more than 150 co-sponsors.

The 40 percent benefits tax doesn’t reform healthcare – it further deforms it and punishes responsible employers and workers who for generations have paid for quality healthcare coverage. We must join with like-minded groups to support repeal of this tax, protect the care we have rightly earned and refuse to be willing victims of unintended consequences.

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