Big “Cadillac Tax” Ahead for Massachusetts’ Middle Class

During the campaigns for the United States Senate and the White House, there has been a good deal of debate about who will best represent the middle-class. With skyrocketing health care costs a central concern to the middle class, it is worth asking what impact the federal Affordable Care Act (ACA) will have on Massachusetts residents.

The conventional wisdom is that healthcare in Massachusetts will not change significantly under the ACA. A careful review of the law, however, reveals that big changes are ahead for the Commonwealth. A new brief from Pioneer Institute, The Impact of the Federal Health Law’s “Cadillac Insurance Tax” in Massachusetts, places estimates on the additional costs associated with the ACA’s so-called “Cadillac tax,” which is targeted at high-cost insurance plans. According to the report, the controversial provision will affect well over 50% of workers in Massachusetts.

Impact of the Federal Health Law’s “Cadillac Insurance Tax” in Massachusetts

The Obama Administration has spent considerable time highlighting some of the more popular provisions of the law such as expanded preventative benefits, allowing children up to age 26 to remain on their parents’ insurance, closing the prescription drug “doughnut hole” for seniors on Medicare, and expanded contraception coverage. Yet, many of the less attractive provisions have not been given a local spotlight.

The Pioneer report finds that given the Commonwealth’s high insurance premiums, a majority of workers in Massachusetts will pay the tax starting in 2018. At the individual level, the report examines the impact of the excise tax on a small business employee, a police officer, and a teacher.

For the 10 years following the introduction of the tax:

• a Business employee on a family plan will owe $86,905 in additional taxes.
• a Police officer on a family plan will owe $53,907 in additional taxes.
• a Teacher on an individual plan will owe $20,807 in additional taxes.

This additional tax is in addition to the cost of insurance premiums. The tax does not discriminate, and will add costs for the lower-middle class, the upper-middle class and everyone in between. Any profession that has robust healthcare benefits – construction workers, teachers, police, state and local public workers, and a majority of those on private insurance – will be immediately and significantly impacted by this tax.