Tags: Obamacare | Cadillac | tax | flexible | spending | accounts

Obamacare 'Cadillac Tax' Threatens Millions of Tax-Free Health Savings Accounts

Image: Obamacare 'Cadillac Tax' Threatens Millions of Tax-Free Health Savings Accounts

Monday, 31 Aug 2015 08:10 AM

The Obamacare "Cadillac tax" won't take effect until 2018, but lawmakers from both parties are concerned the assessment could endanger tax-free flexible health spending and are calling for it to be junked.

“It’s a death knell for them," Rich Stover, a healthcare actuary and principal at Buck Consultants, told Politico.  "If the Cadillac tax doesn’t change, FSAs will go away very quickly.”

The tax may be one of the first items to cross a new president's desk after he or she takes office in 2017, and already, Democratic presidential candidate Bernie Sanders has promised to kill the tax. Frontrunner Hillary Clinton has said she is open to changing it, telling the American Federation of Teachers she is worried "that it may create an incentive to substantially lower the value of the benefits package and shift more and more costs to consumers."

Nevada Republican Sen. Dean Heller, who is working on legislation on the the issue, said the the tax is one way Obamacare continues to "overpromise and under deliver."

The Cadillac caps an open-ended tax break employers get for providing health benefits, which economists say causes rising healthcare costs, but businesses and unions want lawmakers to end the tax before it takes effect.

The tax will apply to benefits that are worth more than $10,200 for individuals and $27,500 for families, and while the tax applies to few people, it still could hit more than half of all employers, reports the nonpartisan Kaiser Family Foundation. It could hit not only traditional health insurance, but flexible spending accounts, supplemental insurance plans and even onsite health clinics.

FSAs are popular with large companies, which contribute an average of $1,291, according to the benefits consulting firm Mercer. About 88 percent of big companies offer the accounts, but the FSAs will likely be one of the first benefits cut as companies determine how to pay the tax.

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The Obamacare Cadillac tax won't take effect until 2018, but lawmakers from both parties are concerned the assessment could endanger tax-free flexible health spending and are calling for it to be junked. "It's a death knell for them, Rich Stover, a healthcare actuary and...
Obamacare, Cadillac, tax, flexible, spending, accounts
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2015-10-31
Monday, 31 Aug 2015 08:10 AM
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