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Coalition takes aim at health reform law's 40% excise tax

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A coalition of employers, insurers and unions on Friday urged federal lawmakers to repeal the health care reform law's so-called Cadillac tax.

Under that Patient Protection and Affordable Care Act provision, a 40% excise tax will be imposed, starting in 2018, on group health care plan premiums that exceed $10,200 for single coverage and $27,500 for family coverage.

In a letter sent to federal lawmakers, the Alliance to Fight the 40 organization says there is little, if any, evidence to support a key assumption behind the tax: that it will raise billions of dollars in new federal revenue as employers cut benefits to avoid the tax and instead boost employees' wages.

“It is economic theory, not hard evidence, supporting the claims that employers will make up lowered health benefits with higher wages,” the letter said.

In addition, while Congress' original intent behind imposing an excise tax was to target only “overly rich plans,” the letter notes that the tax “will hit modest health plans that are expensive simply because they are offered in high-cost areas; or because they cover large numbers of people whose health costs are typically higher than average — women, older and disabled workers and families experiencing catastrophic health events,” the letter said.

A National Business Group on Health survey released last week found that nearly 50% of employers expect to trigger the tax by 2018 if no additional measures are taken to control costs.

Bipartisan legislation, H.R. 2050, to repeal the tax currently has more than 130 co-sponsors. But lawmakers have not yet taken any action on the measure.

The coalition fighting the tax currently has 28 members and includes such well-known organizations as the American Benefits Council, Cigna Corp., the Council of Insurance Agents & Brokers, Pfizer Inc., Proctor & Gamble Co. and Towers Watson & Co.