There are many types of health insurance plans out there in the marketplace, and depending on your needs and financial position, you may find yourself able to take on what is known as a ‘gold-plated’ or Cadillac plan. But what is a Cadillac health insurance plan really?
A ‘Cadillac’ or ‘gold-plated’ insurance plan is a high-cost policy usually defined by the total cost of premiums. That means the name does not refer to what the insurance plan covers or how much the patient has to pay for a doctor or hospital visit, but instead refers to the total cost of premiums.
While often, people with Cadillac plans enjoy low deductibles and excellent benefits that cover almost everything, even the most expensive treatments, that’s not always the case. Premium costs can be high for many reasons aside from generous benefits, especially when it comes to the age, gender and health status of the customer in question. For example, an employer-based plan may suffer from high premiums based on the pooled risk of employees, which may be higher if many employees suffer from disease conditions, are elderly, are female, or happen to live someplace with expensive health costs.
Cadillac insurance plans aren’t only for the wealthy, though their premiums can range in the area of $40,000+. Union workers, workers in highly competitive industries, and employees of businesses with many older or sicker workers may also have premiums in this range. If you use your health plan a lot and don’t have many complaints about it, you may be enjoying a Cadillac insurance plan.
To the U.S. Senate Committee on Finance, any health plan with yearly premiums that come to more than $10,200 for individual coverage or $27,500 for family coverage is a Cadillac plan.
The Cadillac tax is a tax designed to take effect only on the most plush and generous insurance plans. Around 21% of employers today offer such a plan, according to the Kaiser Family Foundation.
The argument for the tax is that our current system, which taxes salary but not health benefits, distorts the economy. Companies may give you a raise in the form of better benefits rather than higher pay, because it’s a better value for them. And the federal government loses out on tax benefits in order to make sure Cadillac insurance plan members continue to enjoy their excellent benefits.
The Cadillac tax is meant to reshape the kind of insurance that employers offer and drive down the overall cost of healthcare. While economists love it, not many other people do. It’s a part of the Affordable Care Act (ACA) that was bundled in along with the rest of the legislation, but never allowed to take effect by Congress.
If it ever went into effect, the tax would either increase businesses’ tax burden or encourage them to offer their workers insurance with fewer or less generous benefits. Neither outcome is much of a crowd pleaser, but since when do increased taxes really get crowds cheering, anyway?