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How far will Obama go on rolling back Cadillac tax?

How far will Obama go on rolling back Cadillac tax?

For the first time, the Obama administration is willing to consider changes to the health care reform law's excise tax, but business groups say the only sensible action Congress should take is to repeal the so-called “Cadillac” tax.

In a briefing Monday, White House Press Secretary Josh Earnest made clear that the administration is open to suggestions to amend the provision, which, starting in 2018, imposes a 40% excise tax on the portion of group health care plan premiums that exceed $10,200 for single coverage and $27,500 for family coverage.

Because the provision does not go into effect for several more years, “we'll be able to evaluate exactly how it would go into effect. And if in that intervening time there are ideas that are put forward that will strengthen the law, then we're open to a conversation” about changes, Mr. Earnest said.

Still, while the door is open to discussion of changes to the excise tax, Mr. Earnest made clear that the administration believes the provision will achieve important objectives.

Exposure to the excise tax, Mr. Earnest said, “gives employers with high-cost plans an incentive to make those plans more efficient,” adding that employees will benefit as their employers reduce coverage to avoid the tax, but boost wages to help offset those cuts.

While business groups welcome the administration's new willingness to consider changes to the excise tax, they say the provision has to be repealed.

“This a small crack in the door, but any tinkering only delays the impact of a provision that must be repealed,” said James Klein, president of the American Benefits Council in Washington.

The tax is “fundamentally flawed. No matter what you do to change your plan, eventually you will be hit,” said Steve Wojcik, vice of president of public policy at the National Business Group on Health in Washington.

Benefit experts say there is no evidence to back the underlying assumption behind the provision — that it will raise billions of dollars in new revenues to help fund federal health plan premium subsidies for the uninsured — as employers boost employees' taxable wages to offset benefit cuts their companies make to avoid triggering the excise tax.

“I'm not aware of any evidence” of that, said Geoff Manville, a principal with Mercer L.L.C. in Washington.

“The excise tax will cause employers to reduce benefits, not increase wages,” said Annette Guarisco Fildes, president and CEO of the ERISA Industry Committee in Washington.

The administration's new open door to consider changes to the excise tax comes as congressional support for an outright repeal of the provision continues to grow.

For example, last month the House of Representatives included a repeal provision in a budget bill that it overwhelming passed, while 172 members of the House now back a repeal bill, H.R. 2050, introduced by Rep. Joe Courtney, D-Conn.

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