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Conservative objections complicate Cadillac tax repeal

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The likelihood of Congress passing legislation to repeal the health care reform law's “Cadillac” tax is deteriorating amid an unlikely loss of support: conservative Republicans.

Three GOP senators said last week that they would oppose a provision in a budget reconciliation bill that would repeal a 40% excise tax on premiums that exceed $10,200 for single overage and $27,500 for family coverage that is to begin in 2018.

The reason Sens. Ted Cruz, R-Texas; Mike Lee, R-Utah; and Marco Rubio, R-Fla.; oppose the bill: They want the entire Patient Protection and Affordable Care Act repealed.

“If this bill cannot be amended so that it fully repeals Obamacare pursuant to Senate rules, we cannot support this bill,” the senators said in statement referring to the budget reconciliation bill, H.R. 3762, that contains the excise tax repeal provision, which the House of Representatives passed last week.

“With millions of Americans now getting health premium increase notices in the mail, we owe our constituents nothing less,” the senators said.

The GOP lawmakers' opposition plus the near certainty that President Barack Obama would veto the budget bill further decreases chances that lawmakers will repeal the tax, observers say.

“It is a blow,” said Annette Guarisco Fildes, president and CEO of the ERISA Industry Committee in Washington, adding that repealing the tax during the current congressional session always has been a long shot.

Repeal will “become harder,” added Damian Myers, a senior associate at law firm Proskauer Rose L.L.P. in Washington, who said backers of repealing the excise tax cannot afford to lose any more support if the budget bill is to win Senate approval.

“The more senators on board, the better it will be,” said Steve Wojick, vice president of public policy at the National Business Group on Health in Washington.

Still, excise tax repeal supporters say they are not giving up.

“We will continue to campaign to get support for repealing the tax,” Ms. Fildes said.

The impact of the excise tax will be widespread, surveys have found.

A recent analysis by benefit consultant Towers Watson & Co. projected that 48% of employers with at least 5,000 employees that offer health plans will be hit by the tax that offer health plans could be hit by the excise tax in 2018, with 82% affected by 2023. Other surveys found that a smaller number, though still a substantial percentage, of employers would be affected by the tax.

Among other things, business groups say the tax is unfair because its application would not recognize wide geographic differences in health care costs.

In addition, the IRS has yet to propose regulations that would aid employers in complying with the tax.