Rallying Against the Cadillac Tax

Rallying Against the Cadillac Tax

Companies, unions, and politicians on both sides of the aisle seek to repeal the coming excise tax on high-cost health plans.

For all their differences, Hillary Clinton, Paul Ryan, and Bernie Sanders agree on one thing: the “Cadillac tax” should be scrapped.

Scheduled to be implemented in 2018, the 40% excise tax on high-cost health-benefit plans (hence the nickname) has been controversial from the beginning. Both the U.S. Chamber of Commerce and the AFL-CIO opposed creation of the tax, a provision of the 2010 Affordable Care Act, along with scores of politicians on both sides of the aisle.

This year, Republicans and Democrats on Capitol Hill have launched several bills to repeal the excise tax. One, sponsored by Sens. Dean Heller (R–Nev.) and Martin Heinrich (D–N.M.), was introduced on September 17 as a companion to a House bill unveiled in April by Democrat Joe Courtney of Connecticut. Another Senate repeal effort was launched on September 24 by Democrat Sherrod Brown of Ohio and Sanders, a Vermont independent, while a bill in the House was filed in February by Frank Guinta (R–N.H.).

The legislative efforts are a nod to intense corporate pressure to repeal or at least modify the excise tax, which assesses a 40% levy on any health plan whose combined employer and employee contributions exceed threshold amounts. For 2018, those thresholds are $10,200 for self-only coverage and $27,500 for families, although they can be adjusted based on various factors.

A broad-based lobbying coalition opposed to the tax, called Alliance to Fight the 40, was launched in July. Members include the American Benefits Council (an advocacy group with more than 400 employer members), individual companies, insurers, and benefits consulting firms, among others. The National Business Group on Health, which represents the views of its 425 employer members on national health policy issues, also opposes the tax.

Based on internal estimates and analysis, the NBGH expects that 48% of its employer members will have at least one health plan triggering the tax in 2018 if they do not make any changes to the plan. Of health plans in which the most employees at a company are enrolled, only 28% would run afoul of the tax in 2018 without any changes, but that number rises to 51% by 2020, according to the NBGH. Read more on CFO.