As part of the Affordable Care Act (ACA), high-cost health plans are subject to an excise tax on benefits that exceed the predetermined cost threshold. This excise tax is often called the "Cadillac Tax."
This tax is scheduled to take effect starting in 2020. The amount of the tax is 40% of the amount considered in excess of the cost threshold.
This fact sheet is based on Health Net's current understanding of the excise tax. Final regulations have not been issued, and we expect further IRS guidance before the tax is assessed.
||The ACA imposes a permanent annual tax beginning in 2020 on all employers who provide high-cost benefits through a group-sponsored group health plan.|
|Purpose||To slow the growth of health care costs and to help finance the expansion of health coverage. The IRS expects the tax to generate $80 billion over the next 10 years.|
|Who calculates and pays||Insured: Employers calculate the tax due on a per-subscriber basis, and insurers submit the tax to the IRS on behalf of their customers.
Self-funded: Employers calculate and pay.
|How a plan's cost is determined||The tax is based on the total cost of each subscriber’s coverage above
the threshold amount. The cost includes premiums paid by employers and
|How the tax will be paid||Forms and instructions for paying the tax are not yet available.|
|Tax implications||The excise tax is not tax deductible.|
|Who's impacted||All employers providing fully-insured and self-insured coverage.|
|Coverage not subject to the excise tax||
|Next steps||Health Net is preparing for implementation and is closely watching for additional IRS guidance. Health Net will provide additional information as updates occur.|
How it works(Examples based on current threshold amounts)
Self-only coverage that costs $12,000 per year would pay an annual excise tax of $720
$12,000 - $10,200 = $1,800 above the $10,200 threshold
$1,800 x 40% = $720
Family coverage that costs $32,000 each year would pay an annual excise tax of $1,800
$32,000 - $27,500 = $4,500 above the $27,500 threshold
$4,500 x 40% = $1,800
Health Net of California, Inc., and Health Net Life Insurance Company are subsidiaries of Health Net, Inc. Health Net is a registered service mark of Health Net, Inc. All rights reserved.