The Higher Ed Workplace Blog

Efforts to Repeal the “Cadillac” Tax Ramp Up

money signOver the last month we have seen a significant uptick in congressional activity related to the repeal of the “Cadillac” tax on high-cost employer-sponsored health coverage. The tax, which is part of President Obama’s healthcare law, would impose a 40 percent levy on healthcare plans for any coverage cost above certain thresholds.

Under current law, the tax will go into effect in 2018, and the initial thresholds will be set at $10,200 for individual coverage and $27,500 for family coverage. While three years may seem far off, for those employers engaged in negotiations over collective bargaining agreements and other long-term contracts, 2018 might as well be tomorrow. Those employers are currently considering the potential impact of the tax and possible responses, such as increasing deductibles, reducing benefits and shifting costs to consumers and taxpayers. Repeal of the tax is estimated to cost $91 billion over 10 years.

Bipartisan support for repeal has ramped up in the Senate in the face of mounting evidence that the tax will not only impact “Cadillac” plans but more modest plans as well, impacting 26 percent of plans in 2018 and 42 percent in 2028. On September 17, Sens. Dean Heller (R-NV) and Martin Heinrich (D-NM) along with 14 cosponsors introduced the companion bill, S.2045, to Rep. Joe Courtney’s (D-CT) “Middle Class Health Benefits Tax Repeal Act”. The House legislation, to which CUPA-HR sent a letter of support, has 153 cosponsors — 137 Democrats and 16 Republicans — and is a straight repeal that does not address replacing the lost revenue generated by the tax.

Also, on September 24, Sens. Sherrod Brown (D-OH) and Bernie Sanders (I-VT) introduced S. 2075 that would also repeal the excise tax on high-cost employer-sponsored health plans. Their bill is cosponsored by 10 Democrats and lacks any Republican support because of a nonbinding resolution which states that the $91 billon of revenue that is lost through repeal must be “offset to ensure that the Patient Protection and Affordable Care Act continues to reduce the deficit while improving health coverage for millions of Americans.”

In addition to the above-mentioned legislation, on September 29, the House Ways and Means Committee passed legislation that would utilize the budget reconciliation process to repeal the Cadillac tax along with another four major provisions of the Affordable Care Act, effectively rendering the healthcare reform law inoperable — the ACA’s individual mandate, the employer mandate, the 2.3 percent medical device tax, and the creation of the Medicare Independent Payment Advisory Board would all be repealed.

Reconciliation is a budget procedural tool that allows the majority to pass legislation in the Senate with just a simple majority (51 votes). A bill can only be considered under reconciliation rules if it is concerned with tax and spending matters and the bill reduces the deficit by at least $1 billion. As Rep. Paul Ryan, chairman of the Committee on Ways and Means, states, “this Obamacare package meets those requirements. It gets to the core of the law and it can pass the Senate with only 51 votes.” As the Republican party holds a majority in both houses of Congress, it is conceivable that this bill will make it to the president’s desk. However, he is sure to veto a bill that would dismantle what he considers one of his crowning achievements.