The Obamacare Tax That Cost You $1,200 Last Year

The Obamacare Tax That Cost You $1,200 Last Year
The Obamacare Tax That Cost You $1,200 Last Year

The president is traveling the country calling for an increase in the national minimum wage. “It is a clear choice,” the president stated in Connecticut last Thursday. “Raise workers’ wages, grow our economy, or give workers what amounts to another pay cut.”

The very next day, a widely circulated report by Towers Watson and the respected nonprofit National Business Group on Health (NBGH) came out, showing how the president himself has already given millions of American workers at all income levels a pay cut — to the tune of $100 a month last year.

This pay cut is the unintended consequence of a provision in the president’s signature policy achievement, the Affordable Care Act, aka Obamacare: a tax on employers, for what the federal government thinks is too much spending on employee health benefits. It goes by the Orwellian nickname “Cadillac Tax” — suggesting employers that fund generous health benefits are really just indulging their employees with leather seating and whitewall tires. The Cadillac Tax is a 40 percent excise tax on health benefits exceeding an annual limit ($10,200 for individuals and $27,500 for families). When the tax provision was first introduced, its opponents included an unusual alliance of unions and business leaders. Theylost.

Slated to go into effect in 2018, the mere threat of the Cadillac Tax has already decreased the income of millions of American workers, according to the Towers Watson/NBGH report. Anxious to avoid hitting the Cadillac Tax spending threshold, employers are quickly converting their benefits plans into high-deductible health plans (HDHPs). This keeps employer premiums lower while shifting more of the costs onto employees, who typically pay a lower premium, but in exchange pay nearly all their medical care out of pocket until they spend through the deductible of $1000 (or in many cases much more).