The Excise Tax on High-Cost Health Plans: Potential Adjustments by Policymakers, Employers, and Employees

This paper examines the Affordable Care Act's (ACA's) excise tax on high-cost health plans and simulates how tax threshold adjustments and potential behavioral responses by employers and enrollees may affect the prevalence of the tax. Our results show that threshold adjustments that account for high premiums for reasons other than the generosity of benefits, such as adjustments for the age/sex composition of the workforce and geographic variation in health care costs, make a difference in the simulated prevalence of the excise tax and may help target the tax more precisely at plans at the high end of the distribution of health benefits.