28 Pages Posted: 11 Sep 2012
Date Written: September 11, 2012
The Affordable Care Act’s primary method to control costs in the private health insurance market is an excise tax on high-cost employer plans, often referred to as the “Cadillac Tax.” This article examines the tax on high-cost plans in detail, focusing on whether the tax is likely to remedy the problems of fairness, overinsurance, or revenue cost that are often-cited weaknesses of the existing tax treatment of employer-provided health insurance. It concludes that the excise tax is likely to be a weak policy tool, and is unlikely to meaningfully address the core criticisms of the tax treatment of employer-provided coverage. The article argues that this result is likely driven by political constraints and an underlying ambivalence about the role of employer-provided coverage in a reformed health insurance market. It concludes by examining other potential avenues for more effectively reforming the tax treatment of employer-provided coverage.
Keywords: health care reform, Cadillac Tax, employer-sponsored health insurance
JEL Classification: H25, I13, J32, K34
Suggested Citation: Suggested Citation
Monahan, Amy, Why Tax High-Cost Employer Health Plans? (September 11, 2012). New York University School of Law, Tax Law Review, Forthcoming; Minnesota Legal Studies Research Paper No. 12-41. Available at SSRN: https://ssrn.com/abstract=2144868 or http://dx.doi.org/10.2139/ssrn.2144868