Cadillac Tax on HealthCare and Impact on HSAs

[kkbmustang]

A big topic in the healthcare world is the upcoming cadillac tax on certain healthcare plans - the tax goes into effect in 2018 and the IRS is seeking comment from practitioners regarding how to implement that tax. If you really want to read the request for comment, which includes several implementation scenarios the IRS is considering, here is Notice 2015-52: http://www.irs.gov/pub/irs-drop/n-15-52.pdf

Related to that issue is this article on how the Cadillac Tax will impact HSAs and FSAs - because the benefits provided through those vehicles will count for purposes of determining the amount exceeding a set threshold. The threshold amounts are $10,200 for self-only coverage and $27,500 for other than self-only coverage. Amounts exceeding the annual threshold amount will be subject to a 40% excise tax, to be paid by employers offering such benefits for their employees.

This means employers will try to get under the threshold to avoid the tax. Many are predicting employers will try to do that by eliminating FSA, HSA and HRA benefits. In determining the benefit amounts subject to the excise tax (i.e. the amounts exceeding the threshold), pre-tax deferrals made by employees to HSAs or FSAs are included.

Article here: http://www.benefitspro.com/2015/08/10/cadillac-tax-hurting-hsas

There are a bunch of articles out there discussing this topic. If you want to find them just google "Cadillac tax."

[seattlecyclone]

Wow, I wasn't aware of that. So if I max out my HSA, my employer is only allowed to spend $7k on my medical policy before getting hit with this tax? If that's more than they currently spend, it seems like it might then be in everyone's best interest for them to get rid of payroll deductions for HSAs and have employees go ahead and contribute to an HSA on their own. We would lose out on the payroll tax exemption for these contributions, but that pales in comparison to the 40% Cadillac tax.

[Nothlit]

In determining the benefit amounts subject to the excise tax (i.e. the amounts exceeding the threshold), pre-tax deferrals made by employees to HSAs or FSAs are included.

Where did you see this? It's not mentioned in the article you linked. Another analysis of the situation makes it sound unclear:

Will employer or employee HSA contributions be included in the calculation?

Code Section 4980I(d)(2)(C) states: “In the case of applicable employer-sponsored coverage consisting of coverage under an arrangement under which the employer makes contributions [to HSAs]. . . , the cost of coverage shall be equal to the amount of employer contributions under the arrangement.” (Emphasis added.)

In other words, employer contributions to HSAs are included in calculating the cost of coverage. It is unclear, however, what counts as “employer contributions.” Do “employer contributions” include employer seeding contributions (e.g., employer contributes $500 to each employee’s HSA), wellness contributions, employee pre-tax payroll contributions made through a cafeteria plan and/or employee after-tax payroll contributions?

It appears that employer seeding contributions will likely count in the calculation. Wellness contributions could also be seen as an employer contribution that counts. The impact of employee payroll contributions is less clear:

• Some industry groups have speculated that employees’ pre-tax HSA contributions are like FSA contributions and therefore should be included in calculating the tax.
• Other industry groups have speculated that employee HSA contributions should not be included in calculating the tax because, unlike FSA contributions, employee HSA contributions can be made outside of payroll and deducted on an individual’s tax return. Additionally, under the ACA, only employer HSA contributions — and not employee HSA contributions — are counted when calculating Actuarial Value and Minimum Value of HSA-qualifying health plans. It seems that if only employer HSA contributions are taken into account in other provisions of the ACA, the same principle should apply here.

[forummm]

Just wanted to point out that the 40% tax is only on the portion of the amount paid that is in excess of the threshold. So if the threshold is $27,500 for the year and the plan was $27,600, the tax would be $40. And I think (but am not certain) the tax would be the employer's responsibility. Naturally they would pass that along if possible.

[kkbmustang]

Just wanted to point out that the 40% tax is only on the portion of the amount paid that is in excess of the threshold. So if the threshold is $27,500 for the year and the plan was $27,600, the tax would be $40. And I think (but am not certain) the tax would be the employer's responsibility. Naturally they would pass that along if possible.

Yes, this is correct.

[kkbmustang]

In determining the benefit amounts subject to the excise tax (i.e. the amounts exceeding the threshold), pre-tax deferrals made by employees to HSAs or FSAs are included.

Where did you see this? It's not mentioned in the article you linked. Another analysis of the situation makes it sound unclear:

Will employer or employee HSA contributions be included in the calculation?

Code Section 4980I(d)(2)(C) states: “In the case of applicable employer-sponsored coverage consisting of coverage under an arrangement under which the employer makes contributions [to HSAs]. . . , the cost of coverage shall be equal to the amount of employer contributions under the arrangement.” (Emphasis added.)

In other words, employer contributions to HSAs are included in calculating the cost of coverage. It is unclear, however, what counts as “employer contributions.” Do “employer contributions” include employer seeding contributions (e.g., employer contributes $500 to each employee’s HSA), wellness contributions, employee pre-tax payroll contributions made through a cafeteria plan and/or employee after-tax payroll contributions?

It appears that employer seeding contributions will likely count in the calculation. Wellness contributions could also be seen as an employer contribution that counts. The impact of employee payroll contributions is less clear:

• Some industry groups have speculated that employees’ pre-tax HSA contributions are like FSA contributions and therefore should be included in calculating the tax.
• Other industry groups have speculated that employee HSA contributions should not be included in calculating the tax because, unlike FSA contributions, employee HSA contributions can be made outside of payroll and deducted on an individual’s tax return. Additionally, under the ACA, only employer HSA contributions — and not employee HSA contributions — are counted when calculating Actuarial Value and Minimum Value of HSA-qualifying health plans. It seems that if only employer HSA contributions are taken into account in other provisions of the ACA, the same principle should apply here.

I got it from the IRS guidance. They have set out their initial thoughts and have asked practitioners to comment. From Section E of Notice 2015-52:

"Applicable coverage under § 4980I(d)(1)(A) is “coverage under any group health plan made available to the employee by an employer which is excludable from the employee’s gross income under section 106, or would be so excludable if it were employer-provided coverage (within the meaning of such section 106).” Applicable coverage includes coverage under certain HSAs, Archer MSAs, FSAs, or HRAs."

AND

"Treasury and IRS are considering an approach under which contributions to account-based plans would be allocated on a pro-rata basis over the period to which the contribution relates (generally, the plan year), regardless of the timing of the contributions during the period. Treasury and IRS anticipate that this allocation rule would apply to HSAs, Archer MSAs, FSAs, and HRAs that are applicable coverage. For example, if an employer contributes an amount to an HSA for an employee for a plan year, that contribution would be allocated ratably to each calendar month of the plan year, regardless of when the employer actually contributes the amount to the HSA. Similarly, if an employee elects to contribute to an FSA for a plan year, the employee’s total contributions would be allocated ratably to each calendar month of the plan year, even though the entire amount contributed for the plan year would be available to reimburse qualified medical expenses on the first day of the plan year. Comments are requested on this approach as well as alternative approaches." [Emphasis added by me]

[kkbmustang]

I just saw a reference to a bipartisan proposal to repeal this portion of the ACA. But, it's not guaranteed to happen.

[jorjor]

I think it spells eventual doom for FSAs since they aren't necessarily associated with high-deductible or otherwise low-cost plans.

HSAs might be okay for the time being since the high-deductible plan premiums should be under the threshold for at least a while in many instances. Most analyses that I've read do suggest that contributions outside of a Cafeteria plan aren't included (they say "after tax contributions" but many are reading that as "contributions not through payroll deductions"). An employer could limit or avoid the tax while also providing the same benefit by providing a seed but not allowing Cafeteria plan contributions, and then the employee could make contributions up to the limit on their own and claim the deduction. Then, only the seed would count and the employee would still get the tax benefit. Someone else would have to check if that sort of mixing or Cafeteria plan limitation is permissible in the first place.

[tjalexander]

Isn't government regulation great!

[jorjor]

Isn't government regulation great!

As an actuary in health insurance, it sure does keep me busy!

I suppose without government regulation we wouldn't have HSAs to complain about possibly being taken away in the first place.

[jorjor]

An employer could limit or avoid the tax while also providing the same benefit by providing a seed but not allowing Cafeteria plan contributions, and then the employee could make contributions up to the limit on their own and claim the deduction. Then, only the seed would count and the employee would still get the tax benefit. Someone else would have to check if that sort of mixing or Cafeteria plan limitation is permissible in the first place.

I should revise this after thinking more about it. Since the employee contributions are outside of the Cafeteria plan in this instance, they wouldn't get the benefit of avoiding payroll tax on the elective contributions. They could claim the deduction on Federal income taxes but are out the payroll tax, to my knowledge. So not exactly the same benefit.

[seattlecyclone]

I applied to a company and in the job interview they stated that there is practically zero cost for employees and their family for health insurance.  Is this type of plan going away with the Cadillac tax?

It depends on how expensive the plan is. If the cost is higher than the "Cadillac" threshold, it depends on whether the company is more inclined to pay the tax to keep benefits the same or to reduce benefits to avoid paying the tax.

[goatmom]

What is the definition of a Cadillac health plan?  Or is a cadillac tax on a health plan?  What is the purpose of this tax?

[seattlecyclone]

What is the definition of a Cadillac health plan?  Or is a cadillac tax on a health plan?  What is the purpose of this tax?

A Cadillac health plan is one that costs more than a certain threshold. In the OP, kkbmustang cited the threshold as $10,200 for an individual plan and $27,500 for a family plan.

As I understand it, the purpose of this tax is twofold:
1) Raise revenue for other parts of the ACA, and
2) Give employers an incentive to stop offering plans where the coverage is so good that employees have no reason to care what a medical procedure costs. The theory goes that as long as doctors can charge basically whatever they want and employers will pay for health plans that cover it, prices will keep going up.

[jorjor]

I applied to a company and in the job interview they stated that there is practically zero cost for employees and their family for health insurance.  Is this type of plan going away with the Cadillac tax?

The portion of the premium paid by the employee (what comes out of your paycheck) doesn't affect the Cadillac Tax calculation. The cost sharing portion that you pay when you go to the doctor does count, since more cost sharing means the total cost of the plan is lower.

Will low cost-sharing plans go away? Maybe. It's certainly more likely that a plan that covers 95% of claims hits the threshold before a plan that pays 80% of claims, all else being equal. More claims are being paid and people go to the doctor more when it doesn't cost anything, thereby increasing the claims further.

But rarely is all else equal. A plan can be more expensive for other reasons than just offering a Cadillac plan. The population can be older. People might be sicker (but not in an industry that gets special treatment). The employees might be located in an expensive geographic location. The flat threshold for the Cadillac Tax doesn't really account for these things.

For this reason, lobbyists are offering ways to correct for some of these things, such as suggesting that no plan offering a plan of less than 90% actuarial value would trigger the Cadillac Tax. That would account for some of those situations where claims costs are high for reasons other than a "Cadillac" plan. Who knows where that will go.

[wowserpockets]

To put some numbers out there, $10,200/year is $850/month.

My employer's healthcare plan contrib. is about $220/month with $20/month towards an HSA (I have a high-deductible plan with HSA, also single coverage). It's not a great plan, but it's not terrible.

More like a Honda civic plan. No danger of excise tax presumably.

[kkbmustang]

The thing is that the thresholds are indexed to CPI inflation, not medical specific inflation which has outpaced CPI inflation by a lot. So, while that threshold may seem like a Cadillac, it could become a Honda quicker than you think.

More info here:

http://us.milliman.com/uploadedFiles/insight/Periodicals/bp/pdfs/BP_052015_ACA%20Cadillac%20Tax%20Primer.pdf

[Axecleaver]

As I understand it, the purpose of this tax is twofold:
1) Raise revenue for other parts of the ACA, and
2) Give employers an incentive to stop offering plans where the coverage is so good that employees have no reason to care what a medical procedure costs. The theory goes that as long as doctors can charge basically whatever they want and employers will pay for health plans that cover it, prices will keep going up.

It's a policy decision. You tax what you want to discourage and you subsidize what you want to encourage. The reason it's in the ACA is because government policy prior to 2010 was to subsidize healthcare spending, in the form of not taxing benefits. When your policy encourages more healthcare spending, you get more of it. The ACA seeks to bend the cost curve and reduce spending. So, they taxed what they didn't want more of.

I, for one, hope the tax stays in.

Perspective: https://www.washingtonpost.com/opinions/cadillac-tax-portion-of-affordable-care-act-is-the-next-target/2015/08/30/f83f688e-4cfc-11e5-902f-39e9219e574b_story.html

[kkbmustang]

As I understand it, the purpose of this tax is twofold:
1) Raise revenue for other parts of the ACA, and
2) Give employers an incentive to stop offering plans where the coverage is so good that employees have no reason to care what a medical procedure costs. The theory goes that as long as doctors can charge basically whatever they want and employers will pay for health plans that cover it, prices will keep going up.

It's a policy decision. You tax what you want to discourage and you subsidize what you want to encourage. The reason it's in the ACA is because government policy prior to 2010 was to subsidize healthcare spending, in the form of not taxing benefits. When your policy encourages more healthcare spending, you get more of it. The ACA seeks to bend the cost curve and reduce spending. So, they taxed what they didn't want more of.

I, for one, hope the tax stays in.

Perspective: https://www.washingtonpost.com/opinions/cadillac-tax-portion-of-affordable-care-act-is-the-next-target/2015/08/30/f83f688e-4cfc-11e5-902f-39e9219e574b_story.html

I find this curious. You hope the tax stays in, why?

[Axecleaver]

Because if the tax is repealed, we'll be encouraging more growth in healthcare spending, which raises prices for everyone. Here's a good explanation from Kaiser Family Foundation (my #1 source for ACA information, they are nonpartisan). http://kff.org/health-costs/issue-brief/how-many-employers-could-be-affected-by-the-cadillac-plan-tax/

<Quoted from the linked article>
"Health benefits offered through work are not taxed like other compensation, with the result that employees may receive tax benefits worth thousands of dollars if they get their health insurance at work. Economists have long argued that providing such tax benefits without a limit encourages employers to offer more generous benefit plans than they otherwise would because employees prefer to receive additional benefits (which are not taxed) in lieu of wages (which are). Employees with generous plans use more health care because they face fewer out-of-pocket costs, and that contributes to the growth in health care costs."

[seattlecyclone]

I would take it a step farther and repeal the income exclusion for employer-provided health insurance. The current system creates a bunch of perverse incentives and forces people to worry about finding insurance when they switch jobs. There's no good reason for the two to be tied together, especially now that everyone can buy health insurance for an affordable price outside of work.

[Axecleaver]

Letter from 100 economists to Congress on 10/1/15, explaining why the Cadillac Tax is a good idea:

http://www.cbpp.org/health-policy-experts-statement-about-excise-tax-on-high-cost-plans

[jorjor]

The Cadillac Tax is probably going to be delayed two years as part of the new spending bill.

http://morningconsult.com/2015/12/two-obamacare-taxes-likely-to-be-delayed-for-two-years/

I wouldn't be surprised if they eventually kick the can down the road long enough that it never actually takes effect.

[hoping2retire35]

I would take it a step farther and repeal the income exclusion for employer-provided health insurance. The current system creates a bunch of perverse incentives and forces people to worry about finding insurance when they switch jobs. There's no good reason for the two to be tied together, especially now that everyone can buy health insurance for an affordable price outside of work.

+1
May have never become unaffordable in the first place if it wasn't for this. And to tax it at 40% after the threshold is pretty steep. Why not just say all benefit after $10k or 27.5k is taxable to the individual? Somehow this will work out where employers will drop insurance coverage without a pay raise, then to avoid the penalty put people on PT work.

[hoping2retire35]

The Cadillac Tax is probably going to be delayed two years as part of the new spending bill.

http://morningconsult.com/2015/12/two-obamacare-taxes-likely-to-be-delayed-for-two-years/

I wouldn't be surprised if they eventually kick the can down the road long enough that it never actually takes effect.

But then it is like axe clever said the prices will go up. When I checked out some plans they would only be about $100 a month for my family, big drop from my employer insurance. So would this raise premiums, if they delay implementation of the tax, or are there price controls? And I guess price controls would lead to company's folding ->single payer?

[jorjor]

But then it is like axe clever said the prices will go up.

I'm not really a proponent or opponent of the Cadillac Tax itself. I have to see this stuff so much that it isn't that political to me. It's just a thing I deal with at work. That being said, I'm not convinced the cost curve would bend all that much.

This tax would ultimately be passed along to employers, and I don't know of any employers that love paying more for health insurance coverage and so they have incentives to lower costs already, yet have been largely unsuccessful. Remember that a good portion of employer plans are self-insured, meaning they don't purchase insurance and instead really just pay the insurer to act as an administrator while they pay their own claims.

When I checked out some plans they would only be about $100 a month for my family, big drop from my employer insurance. So would this raise premiums, if they delay implementation of the tax, or are there price controls? And I guess price controls would lead to company's folding ->single payer?

The premiums you seem to be comparing are net of the employer-portion of premium in your employer plan, and net of subsidies in the individual market. The Cadillac Tax is calculated on the full cost of employer coverage.

It wouldn't really affect much on the individual market since the Cadillac Tax only applies to employer-sponsored coverage, unless an insurer is subsidizing costs between markets. It wouldn't affect much, that is, unless employers stop dropping coverage and sending people to the Exchange, changing the makeup of the individual market.

For the small group insurance market, rates must be filed so any "price controls" come in the form of whether a state approves your rates along with competitive forces. Large group insured rates aren't usually filed with the same rigor as individual/small group rates, so the price controls come in the form of "Am I cheaper than my competitor?" For self-insured rates, the company is paying their own claims and taking the risk for those claims.

It could do lots of things to the employer-sponsored market. Delaying the tax could raise rates because employers have less incentive to control costs without the tax. It could lower employee premiums if companies were just going to pass the tax through to employee premiums. It could stop or delay the devaluing of plans through reduced cost sharing. It could stop or delay employers dropping insurance altogether and sending employees into the individual market.

I would guess that, rather than bending the cost curve, many employers would just offer less and less valuable plans until they say "Screw it!" and stop offering insurance. Many employers will stick around, especially those with unions who demand employer-offered insurance.

[GoldenStache]

This was one of my biggest complaints with ACA.  Not that there was a Cadillac Tax, but that they put the tax off for years and now will fight over it again and probably kill it.  The tax was calculated into how ACA would be paid for, without it just more debt. 

   

[DaMa]

Does anyone have a plan that is over the threshholds?  I had a very nice plan at my previous employer and it was $16,000 per year for family.  HMO with low copays for office visits and Rx, no deductible.  A plan that runs $27k would have to be a PPO with first dollar benefits.

[jorjor]

Does anyone have a plan that is over the threshholds?  I had a very nice plan at my previous employer and it was $16,000 per year for family.  HMO with low copays for office visits and Rx, no deductible.  A plan that runs $27k would have to be a PPO with first dollar benefits.

Yes, there certainly are plans that hit it and no, they aren't all $0 deductible PPO plans. Premium costs vary for more things than just the value of the plan. Large group plans are underwritten or self-insured, so a plan can cost more due to other factors: the company is in a more expensive location, they have an abnormally expensive population, they have just a few really sick people that are running up a bunch of costs but are still on the plan through disability, an old population, large families, etc. All of these have the potential to cause far more variability in rates than the plan design.

It also isn't clear whether your $16k number is gross or net of the employer portion of the premium. The Cadillac Tax includes all the premium, not just what is charged to employees (and also adds FSA, HSA, dental if bundled, and other things). $16k would be on the low side for a family premium, but on the high side for the employee portion of the premium.

For plans that don't hit it right away, add in year-over-year cost trends which are normally higher than they CPI number they will use to index the threshold, and more and more plans will hit it as you go along.

[Gin1984]

Does anyone have a plan that is over the threshholds?  I had a very nice plan at my previous employer and it was $16,000 per year for family.  HMO with low copays for office visits and Rx, no deductible.  A plan that runs $27k would have to be a PPO with first dollar benefits.

My mom's work sort of had one.  And they still do, her employer came out and said they will just eat the cost.  It is $575/person/month, it is not separated by single, family etc.  So if someone had a large family they could go over.  And this is the plan Congress was targeting.  The employer pays the whole cost and there is no copays or deducibles for anything.  The only thing not covered is massage.

[GoldenStache]

Wow Gin.. That is a great plan.  Care to share what field your mom works in? 

[Gin1984]

Wow Gin.. That is a great plan.  Care to share what field your mom works in?

She worked for a union.  I have to say she did get a good chunk of benefits there.  When her employer gained a pension for its members, they also started (of their own volition) paying into the pension for their employees (though they did take away the match for the 403b).  My mom is now living on the pension ($3500/month) and not touching her IRA (rolled over the 403b) except to roll a bit into a Roth IRA (she has a few thousand within the 15% bracket).  However, her previous union employer's benefits were way worse (including a SEP-IRA which only had an annuity in it).

[jorjor]

Final word from this morning's bill: delayed two years along with a supposed provision that makes it refundable once implemented (I haven't read through the bill yet to confirm). It also included a pause of the already-implemented medical device tax through 2017 and a pause of the already-implemented health insurance provider fee for 2017.

[TomTX]

Final word from this morning's bill: delayed two years along with a supposed provision that makes it refundable once implemented (I haven't read through the bill yet to confirm). It also included a pause of the already-implemented medical device tax through 2017 and a pause of the already-implemented health insurance provider fee for 2017.

I'm not going to spend much time on details of the bill until it passes conference committee. There's always a fair chance of diddling around with it til then.

[hoping2retire35]

here is the link i found a while ago when i was wondering what would happen and how much we would have to pay. I have played around with it some and with 2 adults and 5 total people we only have to pay $51 for a 'silver' plan when i put in $30k. Somewhere less than that much income and we go on medicaid or just pay the $1000 premium per month. Does anyone know any way around this? If I am bringing in $25k in passive income I don't mind paying $50 or $100 a month for health insurance. The other thing I am wondering is,  how much can you 'play' with your MAGI, since that is how they calculate income eligibility.

http://kff.org/interactive/subsidy-calculator/

I tried to do this on the healthcare.gov site, not joking here very serious, but couldn't get it to work.

EDIT: I think I am finding my answer on another thread

[AlwaysLearningToSave]

I would take it a step farther and repeal the income exclusion for employer-provided health insurance. The current system creates a bunch of perverse incentives and forces people to worry about finding insurance when they switch jobs. There's no good reason for the two to be tied together, especially now that everyone can buy health insurance for an affordable price outside of work.

+1
May have never become unaffordable in the first place if it wasn't for this. And to tax it at 40% after the threshold is pretty steep. Why not just say all benefit after $10k or 27.5k is taxable to the individual? Somehow this will work out where employers will drop insurance coverage without a pay raise, then to avoid the penalty put people on PT work.

+2.  The exclusion is something of a historical accident that should have been corrected a long time ago.  I have not heard a strong policy reason to keep the exclusion in place other than "well it's always been this way." 

My KISS proposal would be to repeal the income exclusion for employer-provided health insurance (as well as employees' ability to use Section 125 plans for health insurance premiums) and replace it with a limited above-the-line deduction for health insurance premiums and health savings account contributions.  I would also keep in place the current deduction for unreimbursed healthcare expenses. 

I think this arrangement would: (1) make the tax code neutral as to the source of funding for health insurance and health savings; (2) encourage people to either save or insure for healthcare emergencies; (3) encourage employers to start paying wages rather than provide health insurance (if there is no savings to the employee, why would employers incur the administrative expense?); and (4) align the incentives of the healthcare consumer with those of the person who pays the cost of the healthcare, ultimately providing consumer pressure on healthcare providers to keep costs down.  Depending on the revenue generated, it might also help balance the federal budget!

The ACA's exchanges (from my perspective as a consumer) seem to work pretty well.  It is much easier to compare plans and shop around than it used to be.  I believe the infrastructure is now available for the private market to absorb a transition away from primarily employer-provided insurance. 

[jorjor]

I would take it a step farther and repeal the income exclusion for employer-provided health insurance. The current system creates a bunch of perverse incentives and forces people to worry about finding insurance when they switch jobs. There's no good reason for the two to be tied together, especially now that everyone can buy health insurance for an affordable price outside of work.

+1
May have never become unaffordable in the first place if it wasn't for this. And to tax it at 40% after the threshold is pretty steep. Why not just say all benefit after $10k or 27.5k is taxable to the individual? Somehow this will work out where employers will drop insurance coverage without a pay raise, then to avoid the penalty put people on PT work.

+2.  The exclusion is something of a historical accident that should have been corrected a long time ago.  I have not heard a strong policy reason to keep the exclusion in place other than "well it's always been this way." 

My KISS proposal would be to repeal the income exclusion for employer-provided health insurance (as well as employees' ability to use Section 125 plans for health insurance premiums) and replace it with a limited above-the-line deduction for health insurance premiums and health savings account contributions.  I would also keep in place the current deduction for unreimbursed healthcare expenses. 

I think this arrangement would: (1) make the tax code neutral as to the source of funding for health insurance and health savings; (2) encourage people to either save or insure for healthcare emergencies; (3) encourage employers to start paying wages rather than provide health insurance (if there is no savings to the employee, why would employers incur the administrative expense?); and (4) align the incentives of the healthcare consumer with those of the person who pays the cost of the healthcare, ultimately providing consumer pressure on healthcare providers to keep costs down.  Depending on the revenue generated, it might also help balance the federal budget!

The ACA's exchanges (from my perspective as a consumer) seem to work pretty well.  It is much easier to compare plans and shop around than it used to be.  I believe the infrastructure is now available for the private market to absorb a transition away from primarily employer-provided insurance.

While limiting or getting rid of the exclusion is far better policy, there was too much political opposition to make it happen. They ended up at the Cadillac Tax which was a backwards way of trying to limit the exclusion. Even then, there's too much political opposition to the backwards way, so here we are now.

[AlwaysLearningToSave]

While limiting or getting rid of the exclusion is far better policy, there was too much political opposition to make it happen. They ended up at the Cadillac Tax which was a backwards way of trying to limit the exclusion. Even then, there's too much political opposition to the backwards way, so here we are now.

Yup. 

I'd be interested to know from where most of that opposition comes.  Granted, no one likes paying a new tax they previously didn't have to pay but who has the biggest dogs in the fight?  My guess is large employers (or businesses that provide services predominantly or exclusively to sponsors of employer health insurance plans) and healthcare professionals are the predominant opponents.  Large employers enjoy the competitive advantage created by the employee expectation for health insurance coverage coupled with the administrative costs of sponsoring health insurance plans.  This creates a barrier to entry for small businesses (i.e. potential competitors).  Healthcare professionals, despite wearing the cloak of altruism, enjoy profiting from the perverse incentives.   

[hoping2retire35]

While limiting or getting rid of the exclusion is far better policy, there was too much political opposition to make it happen. They ended up at the Cadillac Tax which was a backwards way of trying to limit the exclusion. Even then, there's too much political opposition to the backwards way, so here we are now.

Yup. 

I'd be interested to know from where most of that opposition comes.  Granted, no one likes paying a new tax they previously didn't have to pay but who has the biggest dogs in the fight?  My guess is large employers (or businesses that provide services predominantly or exclusively to sponsors of employer health insurance plans) and healthcare professionals are the predominant opponents.  Large employers enjoy the competitive advantage created by the employee expectation for health insurance coverage coupled with the administrative costs of sponsoring health insurance plans.  This creates a barrier to entry for small businesses (i.e. potential competitors).  Healthcare professionals, despite wearing the cloak of altruism, enjoy profiting from the perverse incentives.

The more I think about taxes, entitlements, deductions (life with government) I think we would be better off with no deductions except maybe qualified charities (mortgage interest, college tuiton, nothing!). Its all a subsidy of some aspect of life (housing, education, or whatever).
As for the bold part, you can look up the pay of most of the high rollers at any non-profit hospital/organization. I know they go to school for a long time, are smart and work hard but seriously, THAT much? there is a lot of very well paid people. I think it is called Form 990.

[Gin1984]

While limiting or getting rid of the exclusion is far better policy, there was too much political opposition to make it happen. They ended up at the Cadillac Tax which was a backwards way of trying to limit the exclusion. Even then, there's too much political opposition to the backwards way, so here we are now.

Yup. 

I'd be interested to know from where most of that opposition comes.  Granted, no one likes paying a new tax they previously didn't have to pay but who has the biggest dogs in the fight?  My guess is large employers (or businesses that provide services predominantly or exclusively to sponsors of employer health insurance plans) and healthcare professionals are the predominant opponents.  Large employers enjoy the competitive advantage created by the employee expectation for health insurance coverage coupled with the administrative costs of sponsoring health insurance plans.  This creates a barrier to entry for small businesses (i.e. potential competitors).  Healthcare professionals, despite wearing the cloak of altruism, enjoy profiting from the perverse incentives.

The more I think about taxes, entitlements, deductions (life with government) I think we would be better off with no deductions except maybe qualified charities (mortgage interest, college tuiton, nothing!). Its all a subsidy of some aspect of life (housing, education, or whatever).
As for the bold part, you can look up the pay of most of the high rollers at any non-profit hospital/organization. I know they go to school for a long time, are smart and work hard but seriously, THAT much? there is a lot of very well paid people. I think it is called Form 990.

Compare their pay to their equivalents in the for-profit sector, does it look as high then?

[jorjor]

While limiting or getting rid of the exclusion is far better policy, there was too much political opposition to make it happen. They ended up at the Cadillac Tax which was a backwards way of trying to limit the exclusion. Even then, there's too much political opposition to the backwards way, so here we are now.

Yup. 

I'd be interested to know from where most of that opposition comes.  Granted, no one likes paying a new tax they previously didn't have to pay but who has the biggest dogs in the fight?  My guess is large employers (or businesses that provide services predominantly or exclusively to sponsors of employer health insurance plans) and healthcare professionals are the predominant opponents.  Large employers enjoy the competitive advantage created by the employee expectation for health insurance coverage coupled with the administrative costs of sponsoring health insurance plans.  This creates a barrier to entry for small businesses (i.e. potential competitors).  Healthcare professionals, despite wearing the cloak of altruism, enjoy profiting from the perverse incentives.

Probably some. There are some employers that like touting benefits as a recruiting tool, and feel they can get more bang for their buck with that than if the compensation were delivered through salaries. On the other hand, I'm sure there are companies that feel trapped into offering benefits who otherwise wouldn't but need to complete for labor.

The most direct opposition is some from both parties. There are enough "no new taxes" people on the right, and enough lobbying of union* interests on the left that you get bipartisan opposition to the idea.

* I cringe at coming off as a "damn those unions" guy, so try not to read into that comment too much. They do often have better-than-average health and retiree health benefits, actively negotiate those benefits, and it sounds like they were a major voice in the recent delay of the Cadillac Tax. They are certainly a player in the debate.

[Axecleaver]

who has the biggest dogs in the fight?

It's the unions and public employees organizations. Take a look at the teacher's union and state public employee unions. Private industry doesn't pay for anything close to that anymore, so the only people affected are the unions. Public sector doesn't have to pay for their benefits (they just raise taxes) so there's minimal opposition to increasing benefits.