Why Tax High-Cost Employer Health Plans?

28 Pages Posted: 11 Sep 2012

See all articles by Amy Monahan

Amy Monahan

University of Minnesota Law School

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

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

Amy Monahan (Contact Author)

University of Minnesota Law School ( email )

229 19th Avenue South
Minneapolis, MN 55455
United States

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