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New lobbying group to grease wheels for Cadillac tax repeal

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Big businesses and unions, traditionally foes at the bargaining table, have both voiced disdain for the health care reform law's “Cadillac” tax on generous health plans. Now, they plan on turning up the heat to repeal it.

A coalition of large employers, business groups and unions — including the American Benefits Council, the Blue Cross and Blue Shield Association, Cigna Corp., Pfizer and Laborers International Union of North America — registered last week as a lobbying group. The group, called the Alliance to Fight the Forty, has the explicit goal of repealing the 40% excise tax.

But the lobbying organization's members are tiptoeing around the popular Cadillac name attached to the tax. “We don't call it the Cadillac tax anymore,” said Kathryn Spangler, senior vice president of health policy for the American Benefits Council and a top lobbyist for the group. “The way it's structured, it'll ultimately hit bicycles.”

President Barack Obama has criticized health plans with little cost-sharing and premium contributions as “fancy plans” that contribute to overconsumption of healthcare services. Many economists support the Cadillac tax as a way to manage the effects of the tax exemption for employer health insurance, which disproportionately benefits higher-income workers.

But business and labor groups have slammed such a tax as costly, burdensome and unfair to employee benefits.

Starting Jan. 1, 2018, all employer-based health plans with annual benefit values more than $10,200 for individuals and $27,500 for families will be subject to a 40% tax for every dollar above those thresholds. Those limits will be tied to inflation after 2018. The average individual health plan costs about $6,000 in 2014, while the average family policy costs $16,800, according to the Kaiser Family Foundation — both well below the Cadillac tax's upper limits.

While the regulation is more than two years from going into effect, employers are ramping up pressure because they typically decide health benefits packages 18 months in advance, Ms. Spangler said.

Many prominent companies and organizations have recently upped copayments and deductibles for their employees in anticipation of the Cadillac tax. The tax is also becoming a factor in some unions' upcoming collective bargaining talks. The United Auto Workers, for example, is getting ready to negotiate health benefits with Detroit's three large automakers. Last month, UAW President Dennis Williams called the excise tax “unfair.”

“Employers have been making changes to their plans in anticipation of that tax for a couple years now,” Ms. Spangler said. “That's only going to grow the closer we get to 2018.”

In addition, with King v. Burwell now a historical footnote and the ACA mostly cemented as the law of the land, stakeholders are looking to make more calculated adjustments where they can.

Similar to the medical-device tax, congressional support is swelling against the Cadillac tax. Two bills in the House have been introduced this year to repeal it — H.R. 879 and H.R. 2050. The latter, introduced in April, already has 120 co-sponsors from both sides of the aisle.

What's unclear is how Congress would pay for the lost revenue that the Cadillac tax would bring in. The tax is expected to generate $87 billion from 2016 through 2025, according to the Congressional Budget Office. Only about a quarter of that money would come from employers that have coverage above the thresholds. A higher amount of taxes from employee wages would comprise the remaining three-quarters, the CBO said.

Ms. Spangler said paying for an alternative would be difficult, but she mentioned how this year's Medicare doc-fix moved forward without a full offset.

The Alliance to Fight the Forty will officially launch this month and will be active during Congress' August recess, Ms. Spangler said.

Bob Herman writes for Modern Healthcare, a sister publication of Business Insurance.