Why The ‘Cadillac Tax’ Will Drive Healthcare Costs Higher For The Middle Class

By Robert Pearl, MD

The Affordable Care Act (ACA), despite its laudable policy goals, contains a provision that could negatively impact the health of millions of middle class individuals, and that is the so-called “Cadillac” tax. Increasingly it is being re-evaluated by policy experts, and there is growing sentiment that it should be rewritten or even repealed.

This excise tax was intended to encourage employers to eliminate overly rich healthcare benefits that could lead to excessive, inappropriate utilization of heathcare services and unnecessary healthcare spending. In addition, the revenue from the tax was to serve as a funding source for a portion of the ACA’s insurance subsidies.

The drafters of this legislation assumed, at the time it was passed, that this tax would affect only very high-priced “Cadillac” or “gold-plated” healthcare plans. But it could well have far broader negative consequences when it goes into effect.

The overarching intent of the ACA was to level the playing field, and enable all Americans to seek early intervention and treatment without financial barriers. But the Cadillac tax threatens to undermine some of the progress that has been made.


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