Health

Flexible Savings Accounts Threatened by Obamacare Cadillac Tax

Flexible Spending Accounts could soon be a thing of the past due to the Affordable Care Act’s high-cost plan tax (HCPT), also known as the Cadillac tax.

Employers across the country are reassessing their current benefit plans due to a 40 percent nondeductible excise tax, set to take effect in 2018, on insurance premiums set above $10,200 for single-employee plans and $27,000 for family coverage.

Millions of people who use FSAs, which allow users to save money tax-free for medical expenses, will likely face paying more out-of-pocket for their health care expenses not covered by insurance.

According to the Kaiser Family Foundation, one in four employers will be affected by the looming tax increase since insurance premiums are expected to rise quicker than inflation.

“They’ll [FSAs] be one of the first things to go,” said Rich Stover, a health care actuary and principal at Buck Consultants, told Politico. “It’s a death knell for them. If the Cadillac tax doesn’t change, FSAs will go away very quickly.”

The tax was intended to generate $87 billion over the course of 10 years to expand government healthcare.

“In addition to raising revenue to fund the cost of coverage expansion under the ACA, the HCPT was intended to discourage employers from offering overly-generous benefit plans and help to contain health care spending,” Kaiser said in the report.

The Washington Examiner reports labor unions, once strong supporters of Obamacare, have teamed up with insurance companies and other employers, creating the “Alliance to Fight the 40,” in an attempt to push Congress to repeal the tax.

On Monday, the group sent members of the House a letter urging lawmakers to change the legislation to avoid employers potentially dropping or lowering coverage.

“The stated goal of health reform was to build upon employer-based coverage and lower costs. This tax will do neither,” they said. “Instead, it will erode an important source of quality coverage and compel a shift of costs to workers – something neither employers, nor employees want to see happen.”

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