The 2017 budget plan recently released by the Obama Administration includes a proposal to adjust the Cadillac Tax thresholds to reflect regional differences in premiums. The Cadillac Tax is a 40 percent excise tax on “high-cost” benefit plans that exceed certain premium thresholds. The initial thresholds were set by the Affordable Care Act at $10,200 for self-only coverage and $27,500 for family coverage with increases to be determined by specified adjustment factors. These factors did not include geographic cost adjustments to account for regional premium differences.
The proposal included in the 2017 budget plan specifies that if the average premium for a state’s “gold” tiered Exchange plan exceeds the Cadillac Tax threshold, then the threshold would be adjusted to the average premium for the “gold” plan. The proposed change is welcomed news since the Cadillac Tax is likely to hit Northern California employers particularly hard.