The Excise Tax on High-Cost Health Plans

March 2016, Vol. 37, No. 2
Paperback, 12 pp.
PDF, 919 kb
Employee Benefit Research Institute, 2016

Download Notes PDF pdf

Executive Summary


  • In December 2015 Congress enacted a two-year delay in the controversial excise tax on high-cost health plans under the Affordable Care Act (ACA), postponing its effective date from 2018 to 2020 and making a number of other modest changes to the tax.

  • Nevertheless, the tax remains wildly unpopular with private-sector sponsors of employee health programs, and its potential effects are widely debated—even though the general public (and most workers in general) have little awareness that the tax has been enacted by Congress and that its potential implementation could cause major changes to how they get health coverage and how much they pay.

  • To further public debate over the issue, the nonpartisan Employee Benefit Research Institute (EBRI) held a policy forum on Dec. 10, 2015, attended by about a hundred health experts and other benefits professionals, to discuss “The Excise Tax on High-Cost Health Plans”—both to clarify what the tax would do and how employers and health-plan sponsors are reacting to it. This EBRI Notes article summarizes the presentations and discussion at that forum.

  • As private-sector health experts pointed out at the EBRI forum, despite the delay in the effective date of the so-called “Cadillac tax” on high-cost health plans, the tax has already been causing changes, as many employers have begun reducing benefits or shifting costs now to avoid the tax if and when it later goes into effect.

  • Presenters at the policy forum included:


o Paul Fronstin, director of EBRI’s Health Research and Education Program, who reviewed the purposes, goals, and key provisions of the excise tax on health plans as it was included in the Affordable Care Act.


o Katy Spangler, senior vice president of health policy for the American Benefits Council, a trade association helping mostly large corporations navigate the employer-sponsored health and retirement benefit systems, and has led lobbying efforts to repeal the tax.


o Kimberly Young, head of employee benefits at Booz Allen Hamilton, who provided the perspective and reactions to the tax by a large employer.


o Richard Stover, principal and consulting actuary in Xerox HR Services’ Knowledge Resource Center (formerly Buck Consultants), who addressed the broader perspective in employer options and strategies in dealing with the excise tax.