Projected Tax Revenues from "Cadillac Tax" Drop in New CBO Estimate

According to a new Congressional Budget Office report, revenues expected to be generated by the ACA's excise tax on high-cost employer-sponsored plans (the "Cadillac Tax") have dropped from $137 billion to $80 billion. Largely because of this drop-off in projected tax revenues, the estimated cost of implementing the law through 2023 rose by $40 billion to $1.36 trillion, the budget office said.

The law imposes the “Cadillac Tax" starting in 2018. Sixty-one percent of employers with 500 workers or more said in a 2011 survey that they expected to trigger the tax unless they took steps, according to Mercer Inc.

CBO analysts said in a May 14 blog post that the projection changed because of “new data on the health insurance premiums paid by employers. As a result, we now expect fewer employment-based plans to be subject to the excise tax.” Other potential reasons for the decrease include employers pressing hospitals and health systems for better rates, adding wellness programs, and raising deductibles and other cost-sharing on workers. A slowdown in U.S. medical costs overall since the recession that began in 2008 probably also contributed to the CBO’s forecast.