The Congressional Budget Office has nearly halved the revenue it expects the federal government to collect from employers through the health care reform law's so-called “Cadillac tax.”
Excise taxes on employers' high-premium insurance plans are expected to generate about $80 billion over the next 10 years, the CBO said Tuesday in a report updating its federal budget projections for fiscal years 2013-2023.
The revised estimate is a nearly 42% decrease from the $137 billion in excise tax revenue that the CBO projected in February.
Beginning in 2018 under the Patient Protection and Affordable Care Act, the Internal Revenue Service will impose a 40% excise tax on employer-sponsored health benefits that cost more than $10,200 for individual coverage and $27,500 for family coverage.
In its report, the CBO said it reduced its estimate on excise tax revenue after examining recent cost trends in employer-sponsored health benefits.
“As a result, we now expect fewer employment-based plans to be subject to the excise tax on high-premium insurance plans and, consequently, have reduced our estimate of revenues from that tax by $58 billion over the 10-year period,” according to the agency's report.
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The CBO also lowered its projections for revenue collected through penalties included in the health care reform law's employer mandate. Under the law, employers with more than 50 full-time workers — defined as employees working 30 hours or more per week — will be required to offer qualified, affordable group health benefit plans to their employees beginning in 2014.
Failure to meet those requirements will result in a $2,000-per-employee tax penalty if an employer's health care plans are not offered to at least 95% of full-time employees and just one full-time employee uses a premium subsidy to purchase coverage offered through a state- or federally-facilitated health insurance exchange.
The CBO projects the federal government will collect about $140 billion from the employer mandate penalties for the 10-year period, down from the $150 billion it projected in February.
The agency said the revision is due mainly to refinements in the IRS' calculation of households' estimated marginal tax rates, which led to a slight increase in the number of the individuals predicted to be enrolled in an employment-based health plan.
However, the CBO also said the projected net decline in the number of lives enrolled in employer-sponsored plans largely offset those gains.
“That slight increase in projected employment-based coverage increases the estimated loss of government revenues from the exclusion from taxation of employers' payments of health insurance premiums for their employees,” the CBO said in the report.