The last major piece of the Affordable Care Act could raise costs for thrifty consumers as well as large corporations and union members when it takes effect in 2018.
The so-called Cadillac tax was meant to discourage extravagant coverage. Critics say it's a tax on essentials, not luxuries. It's getting attention now because employers plan ahead for major costs like healthcare.
With time, an increasing number of companies will be exposed to the tax, according to a recent study. The risk is that middle-class workers could see their job-based benefits diminished.
First to go might be the "flexible spending accounts" offered by many companies. The accounts allow employees to set aside money tax-free for annual insurance deductibles and out-of-pocket health costs. That money comes out of employees' paychecks, and they're not able to use it for other expenses. Savvy consumers see it as a way to stretch their healthcare dollars.
The catch is that under the law those employee contributions count toward the thresholds for triggering the tax.
There are other wrinkles: Companies in areas with high medical costs, such as San Francisco, are more likely to be exposed to the Cadillac tax than those in lower-cost areas like Los Angeles. Ditto for employers with unionized workers who won better benefits through bargaining.
Republicans in Congress and a sizable contingent of Democrats are calling for repealing the tax. Hillary Rodham Clinton, the front-runner Democratic presidential candidate, says she's concerned it will shift costs to workers. Since the tax doesn't take effect right away, it's an issue for the next president.
"As currently structured, I worry that it may create an incentive to substantially lower the value of the benefits package and shift more and more costs to consumers," Clinton said in response to a candidate questionnaire from the American Federation of Teachers.