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Employer group continues to press for full repeal of Cadillac tax

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While an Obama administration proposal to amend the health care reform law's so-called Cadillac tax is a step in the right direction, an employer benefits lobbying group says the tax should still be repealed.

Under current law, a 40% excise tax will be imposed, starting in 2020, on the portion of group health care plan premiums that exceed $10,200 for single coverage and $27,500 for family coverage.

By contrast, as part of its 2017 budget package, the administration will propose that the tax trigger be tied to health plan costs by region.

Under the proposal, outlined earlier this week by administration officials, in any state where the average premium for “gold” coverage on the state's individual health insurance marketplace exceeds the Cadillac-tax threshold, the tax trigger would be set at the level of that average gold premium.

“This policy prevents the tax from creating unintended burdens for firms located in areas where health care is particularly expensive,” Jason Furman, chairman of the administration's Council of Economic Advisers, and Matt Fiedler, the council's chief economist, wrote in an article in the New England Journal of Medicine.

Annette Guarisco Fildes, president and CEO of the ERISA Industry Committee in Washington, said that while she welcomes the proposed change to tie the tax trigger to costs in geographic areas as “recognition” of the many problems with the excise tax, the tax still should be repealed.

“ERIC still strongly believes the excise tax does nothing to reduce the cost of health care or improve its quality, and we will continue to fight for its full repeal,” Ms. Fildes said in a statement Thursday.

Ms. Fildes said she also rejects assumptions, made earlier by the Congressional Budget Office, that the tax will raise billions of dollars in revenues because employers that cut benefits to avoid the tax will offset those cuts by raising employees' taxable wages.

“ERIC reiterates that there is no basis for the belief that any amounts saved by changes to employer health care plans will show up in the wages of employees,” Ms. Fildes added.