Login Register Subscribe
Current Issue

Business groups keep pressure on Cadillac tax

Reprints

Congressional support to repeal the widely criticized Cadillac tax on costly health plans is growing, but the outcome of that drive is far from certain.

Both the House and Senate passed budget legislation last year including a provision to repeal the 40% excise tax on that part of group health care plan premiums that exceed $10,200 for single coverage and $27,500 for family coverage. In fact, the Senate, as part of the broader budget legislation, approved repealing the tax mandated by the Patient Protection and Affordable Care Act on a largely bipartisan 90-10 vote.

While the repeal action did not become law, lawmakers did ultimately approve a two-year delay in the tax, now scheduled to go into effect in 2020, as full repeal efforts continue.

“Between the delay in the excise tax until 2020 and the Senate 90-10 vote to repeal the tax, it's likely that we'll see attempts (in 2016) to repeal with bipartisan support,” said Amy Bergner, a managing director at PricewaterhouseCoopers L.L.P. in Washington.

“We should have some good momentum going into 2016, particularly after the strong Senate 90-10 vote,” said Gretchen Young, senior vice president of health policy at the ERISA Industry Committee in Washington. “We will continue to fight for repeal. We will not give up.”

But passing repeal legislation is still far from certain.

“Right now, it is a hard call to make,” said Brian Marcotte, president and CEO of the Washington-based National Business Group on Health.

“I don't underestimate the challenge we face. We have a lot of work ahead of us,” said James Klein, president of the American Benefits Council in Washington.

One obstacle is opposition from the Obama administration. While White House Press Secretary Josh Earnest has said the administration would consider changes to the excise tax, he ruled out repeal and said the tax will achieve important objectives.

Among other things, Mr. Earnest said the excise tax gives employers a strong financial incentive to make their health care plans more efficient, with employees benefiting as employers boost their wages to help offset benefit cuts.

That higher wage assumption is part of a Congressional Budget Office estimate that the excise tax would generate $87 billion in federal revenue between 2018 and 2025 to help fund premium subsidies for the lower-income uninsured to buy coverage in public health insurance exchanges.

But that assumption is “far-fetched from our perspective,” said Steve Wojick, the NBGH's vice president of public policy in Washington.

“I have not heard of one employer who will do that. That is just not going to happen,” Mr. Klein said.

Benefit experts also expect lawmakers to take another look at amending an ACA provision that defines full-time employees as working at least an average of 30 hours per week. Employers that don't offer coverage to at least 95% of their full-time employees could be liable for a $2,160 penalty per employee in 2016.

While the House a year ago approved legislation to bump the full-time definition to 40 hours per week, the Senate failed to take up the proposal due to opposition from Democrats.

“Senate Democrats held together in opposition to that change. That stopped it cold,” said Geoff Manville, a principal at Mercer L.L.C. in Washington. “There was a concern that the coverage expansion goals of the ACA would not be met if the definition of a full-time employee was moved up to 40 hours per week.”

“While it is possible lawmakers will take another look at the 30-hour rule, possibly the time for altering that definition may have come and gone,” Ms. Bergner said.

If Congress in 2016 does approve legislation repealing portions of the ACA, it would be the fifth time lawmakers have done so since the Affordable Care Act was passed in 2010.

The first was in 2011, when Congress approved repealing an ACA provision that would have required employers to offer low-wage employees company-paid vouchers to buy coverage in public health insurance exchanges.

Also, in 2011, lawmakers repealed a requirement that employers doing more than $600 in business with a corporate vendor furnish Form 1099 statements.

In 2013 with Obama administration support, Congress passed legislation to repeal a provision that would have established a voluntary federal long-long term care insurance program. Administration officials feared the voluntary program would result in adverse selection, sending premiums higher and higher.

Then late last year, as part of a broader measure, Congress passed legislation repealing an ACA provision requiring employers with at least 200 employees to automatically enroll workers who do not respond when asked to select a group health plan offered by their employer.

The driving force behind the bipartisan move, experts say, was the $8 billion in additional revenue, as estimated by the Congressional Budget Office, that would be generated by repealing auto enrollment. Fewer people in employer plans reduce employers' costs, thus increasing employers' taxable income.