State News
December 3, 2014

Health plan “Cadillac tax” expected to cost state $9 million to start

By Morgan True, VTDigger.org

The Affordable Care Act’s so-called “Cadillac tax” on high-value health insurance plans will cost some Vermonters an estimated $9 million when it’s implemented in 2018, according to a draft report released Monday by the Legislative Joint Fiscal Office (JFO). That tax bill is expected to grow to $40 million by 2023.

The “Cadillac tax” is a 40 percent excise tax on the value of health benefits that exceed $10,200 for individuals and $27,500 for families. The tax is imposed on the dollar amount in excess of those thresholds.

Revenue from the tax will go toward the Affordable Care Act’s subsidies. But the tax is also meant to discourage high-value health plans that insulate people from health care costs and engender the overuse of health services. Most public sector health plans, and all individual and family plans offered to state employees in 2015, are expected to be subject to the tax, unless their value is reduced. It is likely that private sector health plans will be affected as well—especially those that self-insure.

Many private employers will reduce the cost of their plans, pass the tax to their employees or give employees a stipend of taxable dollars to purchase coverage through a health insurance exchange, according to the analysis.

The excess benefit for state employees’ SelectCare point-of-service family plan is projected to have a tax liability of $1,400, while the Total Choice plan for individuals is projected to have a $1,600 liability.

Health plans offered to public school employees through the Vermont Education Health Initiative will be affected, with JFO projecting that two of the seven individual plans and one family plan will go over the threshold in 2018. Platinum Vermont Health Connect plans are also expected to cross the threshold by 2020 for MVP and 2022 for Blue Cross-Blue Shield of Vermont.

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