Even though NAHU and many other business and employer groups are pushing for a repeal of the Cadillac tax on Capitol Hill, that hasn’t stopped the IRS from beginning the excise tax’s implementation process. Earlier this year they released Notice 2015-16, Excise Tax on High-Cost Employer-Sponsored Health Coverage, to start the discussion about how the tax will be assessed on employers. Today, NAHU submitted very detailed comments to the Department of Treasury on the notice.
The excise tax has the potential to be extremely damaging to the private employer health insurance marketplace if and when it is implemented in 2018. The 40% excise tax on high-cost plans will apply to employer plans of all sizes and structures. It was initially intended to only apply to a few plans, but new data shows that it will likely affect 31% of all employers in 2018 with the number jumping up to over 50% in just four years. Since the IRS currently plans to base much of the plan valuation on factors beyond the control of most employers, the impact will be huge. NAHU is especially concerned that calculation of the tax may prove to be administratively cumbersome to many employers, especially smaller employers and that HDHP/HSA plans in particular will suffer because of the way the IRS plans to include pre-tax employee contributions in the value calculation. Employees, meanwhile, will suffer economic harm with the restriction of these plans.
NAHU members contributed extensively to the development of these comments, and we are confident that we have provided a robust response that will be very informative to the Department of Treasury as they move forward with implementation. NAHU plans to be very engaged with the IRS as they move forward on this issue, both independently and with coalition partners.