Who is a member?
Our members are the local governments of Massachusetts and their elected and appointed leadership.
The fate and composition of federal legislation on health care reform remains unclear, but it appears increasingly likely that the so-called Cadillac tax will come into effect, though not quite as soon as initially planned.
At the beginning of May, the House of Representatives passed the American Health Care Act, which is intended to “repeal and replace” the Affordable Care Act (also known as Obamacare), but would retain many provisions of the ACA. Under the bill, those with preexisting conditions would still be able to get insurance, though states would have more flexibility in determining what conditions insurers would be required to cover. Individuals would still be able to stay on their parents’ health insurance plans until age 26, and there would be no lifetime cap on the amount of care an individual can receive on a given insurance plan.
The House bill would also retain the ACA’s Cadillac tax, which was designed to be the primary funding mechanism for the ACA to pay for some of the more costly policy changes.
The Cadillac tax is a 40 percent annual excise on individual health insurance plans valued above $10,800 and family plans valued above $29,500. The tax was originally due to go into effect in 2018, but the start date was pushed back to 2020. With the arrival of the Trump administration, however, there was uncertainty about the fate of the tax.
The House bill would delay implementation of the Cadillac tax until 2025 – the latest date the tax could be implemented and still count as a revenue source for the proposed bill. The Senate has yet to take up its own health care bill, but it appears increasingly likely the Cadillac tax is here to stay.
In Massachusetts, the tax could have detrimental impacts on state and municipal budgets. The tax does not take into account regional differences in cost of living or health care costs, so a state like Massachusetts, with higher-than-average health care costs, would see more plans subject to the substantial tax penalty. Additionally, the public sector typically has offered generous health insurance plans as a way to attract the talented individuals that government at all levels needs but cannot compensate at the same level as the private sector can.
While 2025 may seem a long way off, cities and towns are advised to begin determining if their health plans would be subject to the Cadillac tax and what steps they can take to offset the impact.