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Two-year 'Cadillac' tax delay may signal repeal later

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Congressional leaders have unveiled a $1.1 trillion budget deal that would delay the controversial “Cadillac” tax by two years — a major win for business groups and employers that have called for its repeal.

The spending deal unveiled late Tuesday would push the start date of the excise tax from the current 2018 to 2020.

For many, that is a sign that a full repeal is on its way.

The “Cadillac” tax imposed by the health care reform law would impose a 40% excise tax on the part of group health plan premiums that exceed $10,200 for single coverage and $27,500 for family coverage.

“We see the two-year delay as a down payment on a full repeal,” said Katy Spangler, Washington-based senior vice president of health policy at the American Benefits Council, which has called for the tax's repeal on behalf of hundreds of large employers it represents.

According to the council, the excise tax would increase employer costs and reduce access to care.

“It gives Congress and the administration more time to work on the repeal and evaluate the potentially negative consequences of the tax,” said Steve Wojcik, Washington-based vice president of policy at the National Business Group on Health, which he said applauds the delay.

The two-year postponement also “really clouds the outlook for implementation of the tax,” said Geoffrey Manville, principal of government relations at Mercer L.L.C. in Washington.

He said the decision will likely “fall to the next Congress and the next president.” The odds of a repeal of the excise tax are “better than even.”

The two-year delay also gives employers time to figure out how to reduce their health plan costs to avoid triggering the tax, he said.

According to an NBGH survey of 140 of the largest U.S. corporations taken before the latest congressional action, 48% of employers expect at least one of their benefit plans to hit the excise tax in 2018 if they don't take measures to control rising health care costs. By 2020, 72% expect one of their plans to trigger the tax.

The $1.1 trillion budget deal still needs to be approved by Congress, but the White House has signaled it will not veto the deal over a two-year Cadillac tax delay, Washington newspaper The Hill reported.

Also included in the budget package is a moratorium on the health reform law's medical device tax for 2016 and 2017. That tax went into effect in 2013.

The congressional proposal also would have the U.S. comptroller general and the National Association of Insurance Commissioners study whether the reform law uses “suitable” benchmarks to determine whether the tax should be adjusted to reflect age and gender factors in setting the excise tax thresholds.

The claims data of the benchmark the law now uses — Blue Cross Blue Shield's standard benefit option under the Federal Employees Health Benefits Program — has been criticized as an inaccurate representation of the national workforce.