A Cadillac plan is an informal term for any unusually expensive health insurance plan, usually arising in discussions of medical-cost control measures in the United States. The term derives from the Cadillac automobile, which has represented American luxury since its introduction in 1902, and as a health care metaphor dates to the 1970s. The term gained popularity in the early 1990s during the debate over the Clinton health care plan of 1993, and was also widespread during debate over possible excise taxes on "Cadillac" plans during the health care reforms proposed during the Obama administration.
Although neither bill uses the "Cadillac" term, the 2010 Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010, imposes an excise tax on plans with an annual cost exceeding $10,200 for individuals or $27,500 for a family (not including vision and dental benefits).
This excise tax will be 40% of the premiums which exceed $10,200 for individuals or $27,500 for a family.
Criticisms of these plans generally center around the fact that small or nonexistent co-pays, deductibles, or caps encourage the overuse of medical care, driving the cost up for the uninsured or those on other plans, that some say necessitates a Cadillac tax.
A study published in Health Affairs in December 2009 found that high-cost health plans do not provide unusually rich benefits to enrollees. The researchers found that only 3.7% of the variation in the cost of family coverage in employer-sponsored health plans is attributable to differences in the actuarial value of benefits. Only 6.1% of the variation is attributable to the combination of benefit design and plan type (e.g., PPO, HMO, etc.). The employer's industry and regional variations in health care costs explain part of the variation, but most is unexplained. The researchers conclude " that analysts should not equate high-cost plans with Cadillac plans, but that in fact other factors industry and cost of medical inputs are as important in predicting whether a plan is a high-cost plan. Without appropriate adjustments, a simple cap may exacerbate rather than ameliorate current inequities."