Employers, Insurers, Unions Urge Full Repeal of Cadillac Tax

More than 1,000 employers, insurers, unions, and other organizations on Thursday urged Senate leaders to scrap a controversial tax on expensive employer-sponsored health plans that’s set to go into effect in 2022.

In a letter to Senate Majority Leader Mitch McConnell and Minority Leader Chuck Schumer, the organizations warned that the failure to repeal the so-called “Cadillac tax” on certain employer plans would lead workers to pay more for medical treatment and face narrower provider networks. Already, they wrote, employers are altering their benefit plan packages to avoid the tax.

“We are asking you to swiftly, and fully, repeal the impending 40% tax on employer-provided health care before this onerous tax increase hits the pocketbooks of hardworking Americans,” the letter states.

Businesses and insurers have long fought to get rid of the Affordable Care Act’s Cadillac tax, which would impose a 40% excise tax on employer-provided health benefits that exceed certain thresholds. Congress has delayed its implementation twice, so it has never gone into effect, but employers argue that they still have to cut benefits to avoid hitting the threshold in case it does go into effect.

Employers argue that the tax, while meant to target overly generous, high-cost plans, will eventually hit all employer health plans because of the way it is structured. About 178 million people get health coverage through their employers.

According to the National Business Group on Health’s most recent survey or large employers, 73% of employers would have at least one health plan that triggers the tax in 2022 and 94% would in 2026.

“Even though the tax isn’t scheduled to take effect until 2022, employers will begin developing their health care plans and strategies for 2022 next year and the existence of the excise tax will have significant implications for employers and employees,” Brian Marcotte, president and CEO of the National Business Group on Health said in a statement.

The U.S. House of Representatives in July voted 419-6 to repeal the tax, even though full repeal would come with a nearly $200 billion price tag. It is unclear if the Senate will act. A companion bill introduced in the Senate in March has collected 63 cosponsors.

A spokesman for Senate Finance Committee Chair Chuck Grassley (R-Iowa) said the senator is open to considering a full repeal of the Cadillac tax, but said “the more urgent matter is reaching a deal on the more than three dozen tax provisions that expired between the end of 2017 and this year, and a number of clarifications to the tax reform bill.”

 

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