Federal Subsidization of Health Insurance: The “Cadillac Tax” and Tax Credits in the Affordable Care Act and Beyond
The Affordable Care Act (ACA) was enacted with two broad goals: increasing health insurance coverage and slowing the rise of health care costs. This paper examines the benefits and costs of two particular ACA policies: one, the introduction of tax credits in 2014 to subsidize the purchase of health insurance by Americans of limited means; and two, the implementation (in 2020) of a “Cadillac Tax” imposed on “excessively generous” employer-sponsored health insurance plans, designed both to generate revenue for ACA spending provisions and to promote greater cost consciousness among those insured via such plans. I find that the tax credits have been effective at lowering the uninsurance rate. I find further that the “Cadillac Tax” will induce employers to shift their total compensation packages away from health insurance benefits and toward higher wages; but my research suggests that the tax exclusion thresholds are set too high to be wholly effective in inducing consumers to become more cost-conscious in their spending for medical care services. I conclude by analyzing the potential benefits and costs of repealing and replacing the ACA with the American Health Care Act (AHCA).
Franklin and Marshall College Archives, Undergraduate Honors Thesis 2017
- F&M Theses Collection