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The Cadillac Tax is Still Probably Raising Deductibles

1 min readBy: Alan Cole

The news website Vox today covered the issue of rising deductibles in the U.S. health care market. As with their past coverage of the issue, there is a curious omission from the piece: the Cadillac taxThe Cadillac Tax is a 40 percent tax on employer-sponsored health care coverage that exceeds a certain value. The aim: to curb health-care cost growth, reduce favorable tax treatment of employer-provided insurance, and help fund the Affordable Care Act (ACA). It was repealed in late 2019 before taking effect. . The Cadillac taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. , implemented as part of the Affordable Care Act (“Obamacare”) is a 40 percent levy on the value of employer health premiums above a certain level. It encourages employers to shift healthcare costs, at the margin, from the employer level (where the 40 percent levy would apply) to the individual level (where a typical American breadwinner would pay around 25 percent at the margin) in order to lower the tax burden.

A number of outlets have linked this industry trend of higher deductibles to the Cadillac Tax. If Vox is to live up to its tagline and “explain the news,” it should perhaps give some consideration to the possible explanation offered by reports from Kaiser Family Foundation and Mercer, both of which link the Cadillac Tax to higher cost-sharing or consumer-directed health plans (CDHPs). This explanation for the news, for example, was considered by journalists at Bloomberg, the New York Times, the Wall Street Journal, and the Los Angeles Times, in today’s papers alone.

It may behoove Vox to give it a look.