State Employees and ACA "Excise Tax" Update
Union members have many questions about how the Affordable Care Act’s health benefits excise tax — which begins in 2018 and is inaptly dubbed the “Cadillac tax” — might impact state employee benefits.
Scroll down to "Additional Resources" to download a one-page "Myths and Facts" flyer for your use.
In the meantime, here are some answers:
- The tax is not levied on employees, but on health plans or their sponsors (e.g. the State). Some members have been told that the Affordable Care Act places a tax on employees who receive health benefits. This is absolutely incorrect.
- The excise tax is a 40% tax placed on the value of benefits exceeding certain dollar thresholds. The thresholds for 2018 are $10,200 for individual coverage and $27,500 for family coverage (indexed to inflation).
- Because our state employee pension and health care contract now extends through July 1, 2022, there is no way that such a tax, if it applied to Connecticut, can change that contract or reduce our benefits.
- We cannot know for sure if our plans will exceed the thresholds in 2018 or in 2022, but there is good reason for optimism. The increased emphasis the parties have put on keeping workers healthier has cut plan costs and improved lives.
- The “Cadillac” label is a misnomer. The labor movement opposed this aspect of the Affordable Care Act. Repeal of this tax is a major objective of the national labor movement.
The Affordable Care Act contains many more effective and less damaging ways to help contain the increases in health care costs, including encouraging wellness and chronic care initiatives like we have in Connecticut.