Obamacare’s ‘Cadillac tax’ can bring about health savings – study
University of Illinois tax expert Richard Kaplan, in a new paper, said that the President Barack Obama’s Patient Protection and Affordable Care Act (Obamacare)’s “Cadillac tax”, “which isn’t scheduled to take effect until 2020, was enacted to fulfill two related but distinct purposes: to raise revenue to offset the subsidies [that Obamacare] provides to low-income people who buy health insurance on the open market, and to discourage employers from providing particularly generous health insurance plans with low or no deductibles and minimal co-pays.”
These plans materialize because the tax code subsidizes employer-provided health insurance, which makes employees want to trade in a higher salary for an all- or most-expense paid coverage on health insurance, with Kaplan noting, “Such insurance is very expensive, but employers can deduct the premiums while employees need not report this benefit as income. The Cadillac tax was aimed at curbing this sort of compensation, which some argue leads to wasteful spending and overconsumption of health services.”
Kaplan said employers have been gradually shifting the burden of paying for health insurance to their employees “to reduce the cost of health insurance to employers’ bottom line. Second, to allow for wage increases, which resonate with employees more than increased health insurance benefits.”
He added that Obamacare is actually leading to former President George W. Bush’s health care policy by passively encouraging health care accounts “in which you could set money aside for medical expenses, and balances remaining at the end of the year could be rolled over to the next year, unlike with a flexible spending account.”
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