CWA Health Care Reform Update: High Cost Health Plan Excise Tax in 2018

How will health plans be impacted by the excise tax? What protections are offered for people in high risk occupations?

Beginning January 1, 2018, the federal government will impose a new excise tax on plans that are valued at more than $10,200 for individual coverage and more than $27,500 for family coverage. The tax will be equal to 40% of any amount over those thresholds.

Certain plan participants will be subject to adjusted thresholds of $11,850 for individual coverage and $30,950 for family coverage in 2018. These higher levels are for retirees over the age of 55 who are not eligible for Medicare. Active workers may also be subject to these higher thresholds under the law if they are employed by a company where a majority of their workforce is engaged in repairing or installing electrical or telecommunications lines, or is a designated “high risk profession.” “High risk professions” are defined by the law as:

• law enforcement,
• fire protection,
• out-of-hospital emergency medical care (emergency medical technicians, paramedics, and first-responders),
• longshore work,
• construction,
• mining,
• agriculture (excluding food processing),
• forestry,
• fishing, and
• any retirees that were employed for 20 or more years in the previously listed areas.

Both the standard and adjusted excise tax thresholds for 2018 will be increased if costs paid under the Federal Employees Health Benefits Plan (FEHBP) for standard coverage exceed current projections. Going forward, these threshold amounts will be increased every year by the Consumer Price Index for All Urban Consumers (CPI-U) starting in 2020. In 2019 it will be increased by CPI-U + 1%.

Further Reading: Excise Tax on High Cost Employer-Sponsored Health Coverage