‘Cadillac tax’ looms over health care coverage, could affect benefits like flex spending accounts

[Omaha Steve]

http://www.omaha.com/money/cadillac-tax-looms-over-health-care-coverage-could-affect-benefits/article_a84101e5-9345-5aa2-8c6c-6fc6e830f4ae.html

POSTED: THURSDAY, SEPTEMBER 3, 2015 1:00 AM

WASHINGTON (AP) — The last major piece of President Barack Obama’s health care law could raise costs for thrifty consumers as well as large corporations and union members when it takes effect in 2018.

The so-called Cadillac tax was meant to discourage extravagant coverage. Critics say it’s a tax on essentials, not luxuries. It’s getting attention now because employers plan ahead for major costs such as health care.

With time, an increasing number of companies will be exposed to the tax, according to a recent study. The risk is that middle-class workers could see their job-based benefits diminished.

First to go might be the flexible spending accounts offered by many companies. The accounts allow employees to set aside money tax-free for annual insurance deductibles and out-of-pocket health costs. That money comes out of employees’ paychecks, and they’re not able to use it for other expenses. Savvy consumers see it as a way to stretch their health care dollars.

FULL story at link.

[Travis_0004]

1. I never really understood the cadillac tax

It increases at the rate of inflation, yet health insurance cost have always increased faster than inflation.

As if health insurance wasn't expensive enough already, soon there will be a 40% tax on top of that. Most employers will just drop any plan beyond the minimum, and once that is subject to the cadillac tax, it could be cheaper just to drop employee coverage and let them go to the exchange.