The Excise Tax on High-Cost Employer-Sponsored Health Coverage: Background and Economic Analysis

Summary

Congressional Research Service

7-5700

www.crs.gov

R44160

Summary

Beginning in 2018, the Patient Protection and Affordable Care Act (ACA; P.L. 111-148, as amended) imposes a 40%, nondeductible excise tax on the value of applicable employer-sponsored health coverage above specific dollar thresholds. In 2018, these thresholds are $10,200 for single health coverage and $27,500 for non-single (e.g., family) coverage. The thresholds are adjusted for eligible retirees, workers in certain high-risk professions, and plans whose demographics differ from the national workforce.

This excise tax on high-cost employer-sponsored coverage, commonly referred to as the Cadillac tax, is intended to raise revenue and reduce the growth of aggregate health care costs. Particularly, the Cadillac tax effectively counteracts part of the tax exclusion for employer sponsored insurance (ESI), which many economists believe encourages the overconsumption of health benefits.

The Cadillac tax is estimated to raise $3 billion in 2018 and is projected to collect higher amounts of revenue each year through 2024. More plans are projected to be subject to the tax over time, because the Cadillac tax threshold is adjusted annually for inflation with the Consumer Price Index, which generally has been below the rate of growth in insurance premiums. Over the first eight years of implementation, the Congressional Budget Office (CBO) and the Joint Committee on Taxation (JCT) estimate that the tax will raise $87 billion in revenue.

As the 2018 implementation date draws closer, congressional interest in the tax has increased. For example, the Ax the Tax on Middle Class Americans’ Health Plans Act (H.R. 879) and the Middle Class Health Benefits Tax Repeal Act (H.R. 2050) would specifically repeal the Cadillac tax. Opponents of the Cadillac tax argue that the tax unfairly targets certain employers’ health plans because their workforce has higher health care risks. Some organized labor groups also oppose the tax because they collectively bargained for workers to receive more compensation through health benefits instead of higher wages. Proponents of the Cadillac tax argue it will help to slow the growth of national health care costs by increasing the price of excess health benefits.

Based on an analysis of employer plans in the 2013 Medical Expenditure Panel Survey Insurance Component (MEP-IC) dataset, 10.2% of single and 6.0% of non-single insurance plans have premiums that could exceed the Cadillac tax threshold in 2018 (assuming premiums grow at the same rate as their five-year averages). By 2028, 24.7% of single and 19.1% of non-single plans have premiums that could exceed the tax threshold. These estimates do not assume any plan modifications to avoid the tax and do not include contributions to health-related savings or reimbursement accounts. The share of plans that could be subject to the tax is sensitive to projections in premium growth rates.

Contents

Introduction 1

Description of the Tax 2

General Thresholds 3

Exceptions to the General Thresholds 3

Legislative Background 4

Brief History of ESI Tax Exclusion 4

Economic Impact of ESI Tax Exclusion in Brief 5

Congressional Discussions on Reforming the ESI Tax Exclusion 5

Legislative Origins of the Cadillac Tax 6

Estimated Revenue Effects of the Cadillac Tax 7

Share of Plans with Insurance Premiums Exceeding the Tax’s Threshold 8

2018 10

2019 and Beyond 12

Interaction of the Cadillac Tax and a Hypothetical Employer-Sponsored Plan 14

Interaction of the Cadillac Tax and Small Group and Small Business (SHOP) Insurance Exchange Plans 16

Economic Analysis 17

Economic Efficiency 17

Economic Incidence of the Tax 18

Effects on the Market for Medical Care 18

Equity 20

Administrative Simplicity 22

Conclusion 22

Figures

Figure 1. Percentage of Employer-Sponsored, Single Premiums Estimated to Exceed the Cadillac Tax Threshold in 2018, by State 11

Figure 2. Percentage of Employer-Sponsored, Non-Single Premiums Estimated to Exceed the Cadillac Tax Threshold in 2018, by State 12

Figure 3. Percentage of Employer-Sponsored, Single Premiums Estimated to Exceed the Cadillac Tax Threshold, Nationally, 2018-2038 13

Figure 4. Percentage of Employer-Sponsored, Non-Single Premiums Estimated to Exceed the Cadillac Tax Threshold, Nationally, 2018-2038 14

Figure 5. Illustration of the Long-Term Interaction of the Cadillac Tax Threshold and the Premium for a Hypothetical Employer-Provided Single Plan 15

Figure 6. Illustration of the Long-Term Interaction of the Cadillac Tax Threshold and the Premium for a Hypothetical Employer-Provided Non-Single Plan 16

Appendixes

Appendix. Analytical Review and Methodology 23

Contacts

Author Contact Information 25

Introduction

Beginning in 2018, the Patient Protection and Affordable Care Act (ACA; P.L. 111-148, as amended) imposes a nondeductible 40% excise tax on the value of applicable employer-sponsored health coverage above specific dollar thresholds. In 2018, these thresholds are $10,200 for single health coverage and $27,500 for non-single (e.g., family) coverage.

This excise tax on high-cost employer-sponsored coverage, commonly referred to as the Cadillac tax, was an important feature of the ACA for two primary reasons. One, the tax was among several revenue-raising provisions in the ACA meant to raise revenue to offset the cost of other ACA provisions (e.g., the financial subsidies available through the health insurance exchanges). Two, the tax was among several provisions intended to reduce the growth of national health care costs. Particularly, the tax is intended to target higher-cost “Cadillac” health plans (which are characterized as having more generous coverage or lower cost-sharing requirements than average health plans) and to counteract the income tax exclusion for employer-sponsored insurance’s (ESI) incentives. Many economists believe ESI incentives result in the overconsumption of health benefits, resulting in upward pressure on health care costs.

Proponents of the Cadillac tax point out that employer-sponsored plans are the single largest source of health insurance coverage for the non-elderly in the United States and that the current, unlimited ESI tax exclusion (the single largest tax expenditure in the Internal Revenue Code) tends to benefit higher-income individuals more than lower-income individuals.

Critics of the Cadillac tax voice concerns that it might lead insurers to redesign their plans. Some employers claim that the tax imposes an unfair burden on their workforce because of the demographic traits of that workforce or the location of the business—not due to the generosity of their health plans. Some organized labor groups have also opposed the tax because they have negotiated collective bargaining contracts such that their members receive a larger share of their compensation in the form of health benefits in lieu of higher wages. According to these groups, the tax could disrupt these contracts such that employers’ costs could increase (in the form of higher prices of the goods and services that the employers provide) or workers could bear the additional burdens of the tax (in the form of lower total compensation).

In the 114th Congress, the Ax the Tax on Middle Class Americans’ Health Plans Act (H.R. 879) and the Middle Class Health Benefits Tax Repeal Act (H.R. 2050) would specifically repeal the Cadillac tax.

This report gives a brief description of the Cadillac tax. It discusses the legislative origins of the tax and provides an analysis of the revenue effects of the tax. It then analyzes health insurance premium data to provide insights into what share of health insurance plans could exceed the Cadillac tax threshold and how the threshold could affect more health plans over time. This report also analyzes the Cadillac tax using standard economic criteria of efficiency, equity, and administrative simplicity.

This report is based on interpretation of the statute, and it does not consider how future regulations could affect the impact of the tax. For more detailed description of the administration of the tax, see CRS Report R44147, Excise Tax on High-Cost Employer-Sponsored Health Coverage: In Brief, by Annie L. Mach.

Description of the Tax

The ACA will impose a 40% tax on the value of applicable employer-sponsored coverage above a specified dollar threshold, also referred to as the excess benefit, beginning in 2018. Applicable employer-sponsored coverage includes, but is not limited to, the following items that are subject to preferential tax exclusions:

premiums for accident or health coverage paid by the employer or employee, and

certain contributions to tax-advantaged accounts, such as flexible spending accounts (FSAs) and health savings accounts (HSAs).

Additionally, employer-sponsored health coverage that is paid by the employee with after-tax dollars (i.e., not subject to tax exclusion) could be included as applicable coverage.

The excess benefit is calculated as the difference between the value of applicable employer-sponsored coverage and the applicable threshold level. The excess benefit is based on the aggregate cost of all employer-sponsored coverage (unless excepted). Two different thresholds apply: one for workers with single coverage, and one for workers with non-single coverage (e.g., family plans or self plus one plans).

The tax specifically does not apply to (“excepts”) coverage such as long-term care insurance, stand-alone dental and vision insurance, liability insurance, and accident and disability benefits. Plans provided by public employers are not excepted, and health benefits of public employees could be subject to tax.

Employers will be responsible for calculating the Cadillac tax owed for each employee’s employer-sponsored coverage, as well as the share attributable to each coverage provider. The tax is levied on coverage providers, which in some cases will be the health insurance companies that issue the employer-sponsored plans and in some cases will be the employer.

The excise tax is nondeductible from the insurer’s gross income (or the employer’s gross income, in cases where the employer self-insures). This treatment is unlike some other deductible excise taxes (such as the excise tax on medical device manufacturers) but similar to other ACA revenue-raising provisions (such as the annual fee on health insurance providers).

General Thresholds

In 2018, the threshold for calculating excess benefits will be $10,200 for single coverage and $27,500 for non-single coverage. Employees in multiemployer (e.g., union) coverage will be subject only to the non-single thresholds.

In 2019, the base threshold of $10,200 (single) and $27,500 (non-single) will be indexed to the annual change in inflation, as measured by the Consumer Price Index for All Urban Consumers (CPI-U), plus one percentage point. In years 2020 and beyond, the threshold will be further adjusted using only annual changes in the CPI-U. In all instances, the inflation adjustments will be rounded to the nearest multiple of $50.

Exceptions to the General Thresholds

There are several exceptions to the general thresholds. First, the thresholds are higher for retired individuals aged 55 and older who do not qualify for Medicare. For eligible plans, the threshold increases by $1,650 to $11,850 for single coverage and by $3,450 to $30,950 for non-single (or family) coverage.

Second, there is an adjustment for certain high-risk occupations. To be eligible for the occupation exception, the plan must cover employees involved in the repair or installation of electrical or telecommunication lines, law enforcement, fire-protection activities, out-of-hospital emergency medical care (e.g., paramedics), longshore work, construction, mining, agriculture (not including food processing), forestry, and fishing industries.

The same inflation adjustment used for the standard calculation of the Cadillac tax is used to adjust these modified thresholds over time.

Third, employers may also adjust the cost of the health insurance coverage if their workforce differs substantially, in terms of age and gender, from a national risk pool. Regulations in this area could affect the share of plans that are subject to the tax.

Legislative Background

The legislative history of the Cadillac tax is rooted in efforts to limit the effects of the long-standing income tax exclusion for employer-sponsored insurance (ESI). Before discussing the specific legislative origins of the Cadillac tax, it is important to briefly review the legislative history of the ESI tax exclusion.

Brief History of ESI Tax Exclusion

Since the 1920s, ESI benefits have been excluded from federal income tax. The Stabilization Act of 1942 (P.L. 77-729) further encouraged this practice through its wage controls during World War II. With wages—but not benefits—frozen, more firms began offering health benefits to attract employees. After the war, the exclusion remained in place and firms continued to offer health benefits as a fringe benefit. In 1954, the exclusion was codified in the Internal Revenue Code. ESI coverage rates have leveled off or even declined slightly since the 1960s, in part due to the creation of major programs to cover the health benefits for the poor and elderly (and subsequent expansions of such benefits).

Still, ESI coverage plays a large role in the modern economy. First, employer-sponsored plans provide the largest single source of health coverage for the non-elderly population in the United States. As of 2012, 65.8% of the non-elderly population (175.4 million people) were covered by private health insurance. Of that total, 88.9% (156.0 million people) were covered by an employer-sponsored plan. Second, the exclusion has become the largest single tax expenditure in the Internal Revenue Code. For FY2015, the Joint Committee on Taxation (JCT) estimates that the ESI tax exclusion is the single largest federal tax expenditure—$150.6 billion.

Economic Impact of ESI Tax Exclusion in Brief

Economists note that the ESI tax exclusion can both increase and decrease economic efficiency as well as decrease the perceived “fairness” or equity of the income tax. Incentives for ESI could enhance economic efficiency because ESI provides a risk-pooling mechanism that is unrelated to health factors among the working population. Further, ESI could reduce health costs through increased bargaining power and decreased administrative costs. In contrast, studies have concluded that the tax exclusion for ESI encourages greater health care consumption than would be the case without a tax preference, thus generating an economically inefficient outcome.

In addition to the debate over economic efficiency, the ESI tax exclusion changes the burden distribution of the income tax. Generally, the ESI exclusion is regressive, since the exclusion is more valuable to those in higher income brackets. Individuals who obtain coverage outside of an employer-sponsored plan or uninsured workers generally do not benefit from the ESI tax exclusion.

Congressional Discussions on Reforming the ESI Tax Exclusion

Economists and policy experts discussed the merits and potential options for eliminating the ESI tax exclusion over the course of a three-session Senate Finance Committee roundtable discussion held in spring 2009 (one year before enactment of the ACA). In one opening statement, Senate Finance Chairman Max Baucus said

We should also look at the current tax treatment of health care. I know that there is some controversy about doing so. Some do not want to modify the current unlimited exclusion for employer-provided health care, and I agree that we are not going to eliminate that exclusion. But the current tax exclusion is not perfect. It is regressive and often leads people to buy more health coverage than they need...We should look at ways to modify the current tax exclusion so that it provides the right incentives, and we should look to ways to make it fairer and more equitable for everyone.

Members of the Senate Finance Committee and a bipartisan panel of health care experts discussed several issues within the context of limiting or eliminating the ESI tax exclusion in 2009, including

limiting the exclusion for certain taxpayers above a particular income;

limiting the exclusion for the value of plans over a percentile of the average actuarial value of employer-sponsored plans;

adjusting any limit for regional difference in plans or for age of the workforce;

what types of health benefits should be tax preferred (e.g., HSAs, FSAs); and

how to adjust the limit over time.

Legislative Origins of the Cadillac Tax

The idea of the Cadillac tax emerged in legislation as part of the chairman’s mark of the America’s Healthy Future Act of 2009, the Senate Finance Committee’s draft bill for health care reform, released on September 16, 2009. This first version of the Cadillac tax would have taxed insurance policies with excess benefits above a threshold ($8,000 for single plans and $21,000 for family plans) at a rate of 35% beginning in 2013. The Congressional Budget Office (CBO) and the JCT estimated that the provision would have raised $215 billion over the budget window from 2010 to 2019 (i.e., within the first seven fiscal years of implementation). The threshold would have been adjusted for inflation in 2014 and beyond. This version of the bill also included a three-year transition rule that would have increased the threshold for the 17 highest-cost states.

On September 22, 2009, the modified chairman’s mark was released, and the Senate Finance Committee began to mark up the bill over seven days. The modified mark increased the Cadillac tax rate to 40%, but it adjusted the threshold in 2014 and beyond for changes in inflation plus one percentage point. The initial threshold amounts were not modified. The Cadillac tax provision in the modified mark was estimated by CBO and JCT to raise $201 billion over the budget window (i.e., $14 billion less than the initial version).

On December 19, 2009, CBO and JCT released analysis of S.Amdt. 2786, a substitute for the House-passed Affordable Care Act (H.R. 3590). The version of the Cadillac tax in this bill had higher thresholds ($8,500 singles, and $23,000 family policies) than the Senate version, but retained the higher 40% tax rate and the adjustment for inflation plus one percentage point. This version of the Cadillac tax would remain intact until the ACA was approved by Congress on March 21, 2010.

On March 20, 2010, CBO and JCT released analysis of the Health Care and Education Reconciliation Act (HCERA), an amendment to the provisions in the ACA. In particular, HCERA delayed the implementation of the Cadillac tax from 2013 to 2018 and raised the thresholds ($10,200 for singles, and $27,500 for families). CBO and JCT scored the revised Cadillac tax as raising $32 billion from 2010 to 2019 (i.e., after the first two years of implementation). The House passed the Senate-modified ACA and HCERA on March 21, 2010, and the Senate passed the bill (which eventually became P.L. 111-148) by reconciliation on March 25, 2010.

After enactment, bipartisan concerns emerged. These concerns culminated in a letter organized by Representative Joe Courtney and Representative Tom Cole opposing the Cadillac tax and any provision intended to reduce the benefits associated with the ESI tax exclusion.

Estimated Revenue Effects of the Cadillac Tax

In April 2014, CBO and JCT estimated that the Cadillac tax will raise $5 billion in FY2018 and will collect higher amounts of revenue each year through FY2024. Over the first seven years of implementation, CBO and JCT estimated that the tax will raise $120 billion in revenue.

In March 2015, CBO and JCT significantly reduced their most recent estimates of the Cadillac tax to indicate that the tax will raise $87 billion over the first eight years of implementation (FY2018 to FY2025). Because premium growth is now projected to be slower, fewer workers are expected to enroll in employment-based insurance plans whose costs exceed the excise tax thresholds specified in the ACA.

In comparison, CBO and JCT estimated in March 2015 that two other provisions in ACA, the employer penalty and the individual mandate, will raise $145 billion and $36 billion, respectively, over the same eight-year period (FY2018 to FY2025). The $3 billion projected to be raised by the Cadillac tax in FY2018 is also small relative to the estimated $172 billion annual tax expenditure associated with the tax exclusion for ESI in that same year.

Official scores indicate that the Cadillac tax will raise revenue directly on applicable plans exceeding the threshold and indirectly through increases in taxable income for employers that reduce health benefits and increase wages. Roughly one-quarter of the revenue gain stems from excise tax receipts, and roughly three-quarters stems from a net increase in employees’ taxable compensation and, to a lesser extent, in employers’ deductible expenses. This assessment assumes that employers will shift compensation over time from health benefits to wages to reduce or avoid the Cadillac tax.

Share of Plans with Insurance Premiums Exceeding the Tax’s Threshold

This section of the report analyzes insurance premiums to provide insights into what share of plans have insurance premiums exceeding the Cadillac tax threshold. These premiums are a major component of health plan coverage as defined by ACA, but they are not the only component of coverage. Thus, the Cadillac tax could affect more health plans over time than estimated here if all components of applicable coverage are included. Note that the estimates also assume no further changes are made by employer providers to avoid or reduce exposure to the tax. Other studies are reviewed in the Appendix of this report.

In June 2015, the Congressional Research Service (CRS) requested that the Department of Health and Human Services’ (HHS’s) Agency for Healthcare Research and Quality (AHRQ) estimate the share of premiums that could have a health insurance premium greater than the applicable Cadillac tax threshold. At the request of CRS, AHRQ used the 2013 Medical Expenditure Panel Survey Insurance Component (MEP-IC) dataset, which is a sample of plans provided by 39,216 private-sector establishments and public employers. CRS provided AHRQ with Cadillac tax thresholds adjusted for CBO’s projected annual changes in the CPI-U between 2018 and 2038. CRS then asked AHRQ to simulate the growth of insurance premium values offered by employers in the MEPS-IC data. These scenarios are based on different historical trends exhibited by the cost of the average insurance premium found the Kaiser Family Foundation’s (KFF’s) and the Health Research & Educational Trust’s 2014 Employer Health Benefits Survey. The scenarios include

“Lower Growth”: assuming an annual growth rate in average insurance premiums of 4.6% for single coverage and 4.7% for family coverage, based on a five-year average of trends within the KFF data.

“Moderate Growth”: assuming an annual growth rate in average insurance premiums of 5.0% for single coverage and 5.4% for family coverage, based on a 10-year average of trends within the KFF data.

“Higher Growth”: assuming an annual growth rate in average insurance premiums of 7.0% for single coverage and 7.4% for family coverage, based on a 15-year average of trends within the KFF data.

The analysis at the state level is provided using only the lower-growth scenario, given the low probability that insurance premium growth by 2018 will increase to rates seen more than a decade ago. In contrast, analyses of the Cadillac tax at the national level are plotted according to all three growth scenarios. While it is uncertain that insurance premium growth will reach the rates in the moderate- to high-growth scenarios, these scenarios illustrate how changes in the actual rate of insurance premium growth can affect the number of premiums subject to the tax.

A full description of the data and methodology used to derive these illustrations appears in the Appendix.

Caution should be exercised when interpreting some state results due to potential estimation issues stemming from smaller sample sizes and significant variation in premium amounts in some states.

The estimates of the share of plans with premiums that exceed the Cadillac tax threshold provided in this section of the report should not be conflated with analysis of how many plans could actually be subject to the Cadillac tax. This analysis only includes insurance premiums and does not include the costs of other types of coverage that count toward the threshold (e.g., certain contributions to FSAs and HSAs).

Additionally, any estimate of the Cadillac tax is subject to a number of uncertainties.

First, the growth rate of premium costs has generally been declining in recent years. The analysis in this report models different assumptions in the potential growth of health care costs. Additionally, the analysis in this section of the report does not imply that each scenario is equally likely; rather, this analysis illustrates how sensitive estimates of the Cadillac tax are to inflation projections. Estimates of the impact of the tax using older data could overestimate the actual increase in average health insurance costs in more recent years. Future insurance premium growth rates could continue slowing, or could deviate from the trends used here.

Second, it is uncertain how employers will respond (or have already responded) to the tax. Since the tax was enacted in 2010, some employers have already begun to offer less generous plans (thus, some behavioral effects would already be contained within observed data). For example, employers could offer a high-deductible health plan, which might be less likely to cross the threshold than their traditional PPO/HMO plan. The analysis in this section assumes that employers do not take any actions to adjust the plans offered to employees.

Third, this report does not take into consideration how regulations could affect implementation of the tax. Treasury and IRS could issue regulations clarifying the benefits potentially subject to tax, safe harbors for employers, and modifications in various cost adjustments (e.g., under the workforce age and gender provision). Regulations in these areas could reduce (or increase) the number of plans subject to the tax.

2018

Figure 1 and Figure 2 depict the share of single and non-single plans, respectively, with premiums that could exceed the tax threshold in 2018, by state.

As shown in Figure 1, approximately 10.2% of single plans, nationally, have premiums that could exceed the tax threshold in 2018. As shown in Figure 2, approximately 6.0% of non-single plans, nationally, have premiums that could exceed the tax threshold in 2018.

It should be noted that the following figures do not provide insight into what share of a plan’s health benefits is subject to tax or the amount by which the plan exceeds the threshold. Only the portion of health benefits in excess of the threshold is subject to tax. Additionally, these figures do not quantify how many enrollees in these plans could be affected.

Figure 1. Percentage of Employer-Sponsored, Single Plans with Premiums

Estimated to Exceed the Cadillac Tax Threshold in 2018, by State

(under the assumption of 4.7% annual premium growth, in individual plans)

Source: U.S. Department of Health and Human Services (HHS), Agency for Healthcare Research and Quality (AHRQ) analysis of 2013 Medical Expenditure Panel Survey-Insurance Component (MEPS-IC) data provided to the Congressional Research Service (CRS) in June 2015.

Notes: All reported values have a standard error (SE) of less than 2% and a relative standard error (RSE) of less than 30%. Caution should be taken when interpreting the results with an asterisk (*), which denotes an RSE of greater than 25%. Any estimate with an RSE greater than 30% is considered unreliable and omitted from this graphic. Reported values are weighted by the number of plans in the data sample. This graphic does not take into account any exceptions to the general Cadillac tax threshold for certain “high-risk” professions or for employers with workforces that differ from the age and gender profile of the national risk pool. See report text for more details.

Figure 2. Percentage of Employer-Sponsored, Non-Single Plans with Premiums Estimated to Exceed the Cadillac Tax Threshold in 2018, by State

(under the assumption of 4.6% annual premium growth, in family plans)

Source: AHRQ analysis of 2013 MEPS-IC data provided to CRS in June 2015.

Notes: All reported values have a standard error (SE) of less than 2% and a relative standard error (RSE) of less than 30%. Caution should be taken when interpreting the results with an asterisk (*), which denotes an RSE of greater than 25%. Any estimate with an RSE greater than 30% if considered unreliable and omitted from this graphic. Reported values are weighted by the number of plans in the data sample. This graphic does not take into account any exceptions to the general Cadillac tax threshold for certain “high-risk” professions or for employers with workforces that differ from the age and gender profile of the national risk pool. See report text for more details.

2019 and Beyond

Figure 3 and Figure 4 show the national share of single and non-single plans, respectively, with premiums that could exceed the Cadillac tax threshold over time. The share of plans that could be subject to the Cadillac tax is estimated to increase over time, primarily because the growth of inflation in the CPI-U (which is used to adjust the Cadillac tax threshold) is projected to increase more slowly than the historical trends for premium growth.

Figure 3 shows that between 2018 and 2028, the share of single plans with premiums that could exceed the Cadillac tax threshold increases from 10.2% to 24.7% under the lower-growth scenario. Figure 4 shows that between 2018 and 2028, the share of non-single plans that could be subject to the Cadillac tax increases from 6.0% to 19.1% under the lower-growth scenario. For both single and non-single plans, the share of plans that exceed the threshold by 2028 is higher under the moderate- and higher-growth scenarios.

Figure 3. Percentage of Employer-Sponsored, Single Plans with Premiums Estimated to Exceed the Cadillac Tax Threshold, Nationally, 2018-2038

Sources: AHRQ analysis of 2013 MEPS-IC data provided to CRS in June 2015; growth rates in the different scenarios are derived from historical average premium values from Kaiser Family Foundation (KFF), 2014 Annual Survey of Employer Health Benefits, September 10, 2014, at http://kff.org/health-costs/report/2014-employer-health-benefits-survey/; and projections of the Consumer Price Index for All Urban Consumers (CPI-U) from the Congressional Budget Office, The Budget and Economic Outlook: 2015 to 2025, January 26, 2015, at https://www.cbo.gov/publication/45066.

Notes: “Lower Growth” scenario assumes annual growth in average health insurance premiums of 4.6%, based on a 5-year average in historical trends; “Moderate Growth” scenario assumes an annual growth rate of 5.0%, based on a 10-year average; and “Higher Growth” estimate assumes an annual growth rate of 7.0%, based on a 15-year average. Historical trends are averaged from KFF data. Regarding the tax threshold, trends in the CPI-U are held constant at 2024 levels for years outside of CBO’s projection window (i.e., 2025 to 2038). See Appendix for more details on methodology. This graphic does not take into account any exceptions to the general Cadillac tax threshold for certain “high-risk” professions or for employers with workforces that differ from the age and gender profile of the national risk pool. See report text for more details.

Figure 4. Percentage of Employer-Sponsored, Non-Single Plans with Premiums

Estimated to Exceed the Cadillac Tax Threshold, Nationally, 2018-2038

Sources: AHRQ analysis of 2013 MEPS-IC data provided to CRS in June 2015; growth rates in the different scenarios are derived from historical average premium values from KFF, 2014 Annual Survey of Employer Health Benefits, September 10, 2014, at http://kff.org/health-costs/report/2014-employer-health-benefits-survey/; and projections of the CPI-U from the CBO, The Budget and Economic Outloo