AARP maneuvers to avoid federal penalty on “Cadillac” insurance policies

Originally posted 11/05/2010 by me elsewhere

The federal government will enact a 40% tax on so-called “Cadillac” insurance policies starting in 2018. A “Cadillac” plan is one that’s valued at over $10,200 for individuals or $27,500 for families. According to Yahoo news, AARP is currently adjusting its insurance policies and has promised to make future changes in order to make sure that they stay below the “Cadillac” threshold.

Although the tax starts being levied in 2018, inflation-related adjustments won’t begin until 2020. And at that point the adjustments will be pegged to overall inflation, not the overall increase in health care costs which have always grown at a much higher rate than the inflation index.

For most companies the key strategy to avoid the tax is to shift health care costs to the individual via higher deductibles and co-pays.

 

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