Login Register Subscribe
Current Issue

Now, it's time to repeal ACA excise tax


We welcome last month's congressional action to delay the health care reform law's excise tax on the portion of group health insurance plan premiums that exceed statutory levels as a first step toward repeal of the unnecessary and unjustified ACA provision.

With the delay to 2020, lawmakers now can carefully study the need for the so-called Cadillac tax — something they did not do in 2010 when they included it in the Patient Protection and Affordable Care Act. Under that provision, that portion of group health care plan premiums exceeding $10,200 for single coverage and $27,500 for family coverage will be hit with a 40% federal excise tax.

Since its enactment, federal researchers have clung to an unproven — and we believe incorrect — theory that the tax will be a big revenue generator, with the receipts used to help pay for health insurance premium subsidies the ACA authorized to the lower-income people obtaining coverage in public insurance exchanges.

The Congressional Budget Office has estimated that the tax would raise $87 billion between 2018 through 2025.

And what was basis of that CBO estimate? One assumption is that to avoid the excise tax, more employers will shift to lower-cost, high-deductible plans. That shift, so the reasoning goes, will increase employers' taxable income by reducing tax-deductible health premium expenses. But employers don't need the threat of being hit by an excise tax to move to lower-cost consumer-driven health care plans. Indeed, in just the last three years, enrollment in CDHPs has nearly doubled to 28% of covered employees working for larger employers, according to a Mercer L.L.C. survey. Employers know that exposure to more costs through higher deductibles makes employees better health care consumers.

Even more dubious is the CBO assumption that an excise tax will generate revenue because employers cutting benefits will boost employees' wages — and with that, their taxable incomes — to help offset the financial impact of paying a greater portion of their health care expenses.

What is fact is that the excise tax is unfair. An employer based in a part of the country with high health care costs could be hit with a tax, while an employer in another area with lower costs would not.

For these and many other reasons, we hope Congress moves quickly to repeal the unnecessary and unfair tax.