What Is A High Cost Group Health Insurance Plan?

There has been a lot of talk about high-cost group health insurance. Lately, some healthcare reform proposals have included a tax on so-called “Cadillac” health insurance. These plans are comprehensive, more so than most other coverage in the market. Co-payments can be extremely low, along with deductibles. Such employee health insurance is becoming increasingly rare, but is still common among members of labor unions. That is because generous group health insurance benefits are in their contracts, often having been negotiated for instead of higher wages.

How can you tell if you have a high cost group health insurance plan? According to the federal government, these are the thresholds (which include the portion of premiums paid for by the employer, as well as the amount paid by the employee):

  • Individual: Group health insurance worth over $8,500 per year is considered high-cost.
  • Family: Health insurance with costs above $23,000 annually is judged to be high-cost.

If your plan exceeds that threshold, your employer may be taxed at a 40% rate for the excess amount. That will cause many of them to switch to cheaper group health insurance. Many employees with a high cost group health insurance plan enjoy extensive benefits, which can include acupuncture, massage, and other services generally not covered by health insurance. Those in support of the tax believe that it will force employers to exert downward pressure on the group health insurance quotes offered to them by insurance companies. However, it may also result in decreased quality of care.

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