The Cadillac tax: What does it mean for your clients?

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The “Cadillac tax” has been top of mind lately for many business owners, mainly because they are still unsure of how the tax will affect their business. Proponents of the tax predict it will decrease health care costs by discouraging employers from offering high cost health plans and, instead, paying their employees more. Supporters of the Cadillac tax also expect it will cut health care costs by reducing free-spending health plans, which in turn can reduce the overall demand for health care services and make it more difficult for health care service costs to increase. The hope is that everyone, even those whose health plans are not affected by the implementation of the tax, will benefit from the reduced cost of care. 

However, one of the biggest issues people have with the tax is whether or not it will mean the end of pre-tax benefits like flexible spending accounts (FSAs) and whether it will shift an increasing portion of health care costs to employees. Although the tax won’t be implemented until 2018, companies should understand how they can start offering benefits in the next two years that won’t trigger the tax. The various regulations are a lot to take in, so it’s important for brokers to ensure their clients are a step ahead of any potential penalties and planning accordingly.