Friday, December 18, 2015

Congress Passes Two Year “Cadillac Tax” Delay

Congress Passes Two Year “Cadillac Tax” Delay

Washington, D.C. – Today, the Congress passed a two-year delay of the “Cadillac Tax,” which was included in the Omnibus spending package. The Senate Omnibus package was approved by a vote of 65 to 33. The House of Representatives approved the package by a vote of 316 to 113.   The legislation is currently awaiting Presidential signature.

“We applaud Congress for passing a two-year delay of the ‘Cadillac Tax’ and thank the Congressional champions who made this possible.  The delay provides a much-needed down payment toward the ultimate goal of full repeal,” said James A. Klein, President of the American Benefits Council.

“The breadth of concern about the tax is evidenced in the composition of our growing coalition – patient advocates, private sector and public sector employers, unions and non-profit groups.  We are united in support of defending the health coverage that protects over 175 million Americans,” said Klein.

“Congress has done the right thing to delay a 40 percent tax that would make employer-sponsored health insurance more difficult for workers to afford and threaten patient access to potentially lifesaving care,” said Chris Hansen, president of the American Cancer Society Cancer Action Network (ACS CAN).

“The cost of medical care is what truly drives health insurance premiums and the Cadillac tax does very little to rein in healthcare costs. For many small employers, health insurance is more expensive than ever,” said Janet Trautwein, CEO of the National Association of Health. Underwriters. “Delaying and hopefully repealing the Cadillac tax will make health insurance more affordable, and encourage more employers to retain coverage for their workers.”

“We are pleased that Congress has taken a solid first step to protect the wages and benefits of millions of hard working Americans,” said D. Taylor, President of UNITEHERE. “Our union is proud to engage this fight and will continue to do so.”

“Consistent analysis has shown that the ‘Cadillac Tax’ disproportionately harms dependent coverage for children, and we’re pleased to see there was broad, bipartisan support in Congress to delay the tax,” said Bruce Lesley, President of First Focus, a national children’s advocacy organization. “This is a win for families.”

“NTCA–The Rural Broadband Association is pleased that Congress voted in support of the a two-year delay of the 40% tax on employee health benefits as part of the 2016 omnibus appropriations bill,” said Shirley Bloomfield, CEO of NTCA–The Rural Broadband Association. “This provision is a step in the right direction toward a full repeal, and will be important to help small businesses like those NTCA represents attract and retain qualified employees in rural America.”

"We commend our partners on Capitol Hill for recognizing that counties must continue to offer competitive health benefits to attract and retain quality employees," said National Association of Counties President Sallie Clark.  "A two-year delay is a good start, and we will work toward a full repeal because the excise tax on employer-sponsored health coverage would have significant impacts on county budgets and taxpayers."

The “Cadillac Tax” is a 40% non-deductible tax on the cost of employer-sponsored health coverage that exceeds certain benefit thresholds. 

 The Alliance to Fight the 40 is a broad based coalition comprised of public and private sector employer organizations, consumer groups, patient advocates, employee advocates, health care companies, businesses and other stakeholders that support employer-sponsored health coverage. This coverage is the backbone of our health care system and protects over 175 million Americans across the United States. The Alliance seeks to repeal the 40% tax on employee health benefits to ensure that employer-sponsored coverage remains an effective and affordable option for working Americans and their families.

For more information on the 40% Tax on Health Benefits, visit our website at or follow us on Twitter @Fightthe40.


Friday, December 11, 2015

Bipartisan Lawmakers Urge Congress to Fight the 40% Tax on Employee Benefits

Bipartisan Lawmakers Urge Congress 
to Fight the 40% Tax on Employee Benefits

On December 2, bipartisan lawmakers of the Senate and House and representatives of large and small businesses, a national patient organization, and the 11th largest public retirement system joined the Alliance to Fight the 40 at a media event to raise awareness on the need to repeal the 40% tax on employee benefits.

Just one day after the event, the Senate voted 90-10 to approve an amendment to fully repeal the tax. This overwhelming support is coupled with 283 cosponsors on House legislation to repeal the tax, which is just 7 shy of reaching the 290 members needed for a veto proof majority.

Sen. Dean Heller (R-NV) argued the tax would cause Americans that rely on employer-sponsored health plans “reduced benefits, increased premiums and higher deductibles,” and Sen. Martin Heinrich echoed these sentiments, adding that the Cadillac Tax means “less access to primary care.”

Rep. Frank Guinta (R-NH) made note that “the White House recognizes the level of bipartisan support” to repeal the Cadillac Tax. He added, “Now it’s time to act!”

Rep. Joe Courtney (D-CT) asked for a full repeal of the Cadillac Tax stating, “We can join together to…keep health insurance affordable for every working family.” Along with Sen. Sherrod Brown, the four lawmakers have taken on a large role in the effort to repeal the tax, sending a letter to the president requesting a discussion about the negative impact the Cadillac Tax will have on workers that rely on employer-sponsored healthcare.

These and other leaders are working to ensure that American workers, retirees, and patients with chronic illnesses are all able to afford their healthcare without worrying about the Cadillac Tax raising costs. Now is the time to take action and fight to repeal this tax altogether. 

Thursday, December 3, 2015

Alliance to Fight the 40 Statement on Bipartisan Vote to Repeal the “Cadillac Tax”

For Immediate Release
December 3, 2015
Tara Bradshaw (202) 467-4603

Alliance to Fight the 40 Statement on Bipartisan Vote to Repeal the “Cadillac Tax”

Washington, D.C. – The Alliance to Fight the 40 issued the following statement from James A. Klein, President of the American Benefits Council, following a 90-10 vote in favor of an amendment to permanently repeal the 40% tax on employee health benefits:

“We applaud the bi-partisan Senate leadership for making possible this important vote and the overwhelming number of Senators who voted to protect health coverage for 175 million Americans by supporting permanent repeal of the 40% 'Cadillac' tax. This tax is already proving to be a burden on workers, families, retirees and those living with chronic illnesses. We will continue working on this very critical issue until full repeal is enacted. Today’s vote is another strong bi-partisan recognition that this tax must be repealed to preserve employer-sponsored health coverage."

The Alliance to Fight the 40 is a broad based coalition comprised of public and private sector employer organizations, consumer groups, patient advocates, unions, health care companies, businesses and other stakeholders that support employer-sponsored health coverage. This coverage is the backbone of our health care system and protects over 175 million Americans across the United States. The Alliance seeks to repeal the 40% tax on employee health benefits to ensure that employer-sponsored coverage remains an effective and affordable option for working Americans and their families.

For more information on the 40% Tax on Health Benefits, visit our website at or follow us on Twitter @Fightthe40.


ICYMI: Members of Congress Join Forces with Alliance to Fight the 40 in Calling for “Cadillac Tax” Repeal

For Immediate Release
December 3, 2015
Tara Bradshaw

Members of Congress Join Forces with Alliance to Fight the 40 in Calling for “Cadillac Tax” Repeal

Washington, D.C. – On Wednesday, Republican and Democratic Members of the Senate and House were joined by representatives of large and small businesses, a national patient organization, the 11th largest public retirement system, and laborers at a media event to call for the repeal of the 40% tax on employee health benefits, more commonly known as the “Cadillac Tax” before Congress adjourns at the end of the month.
All urged a repeal of the Cadillac Tax in order to reduce the negative impact it will have on the 175 million Americans that rely on employer-sponsored health coverage, including workers, families, retirees and those living with chronic illnesses.

Key coverage of the event includes:

The Hill: The efforts to ditch the tax, which House Democrats, including Courtney, have opposed since the creation of ObamaCare, has been lifted by a campaign called the Alliance to Fight the 40. That coalition [has] warned that millions of middle-class workers will see the effects of the tax, which has yet to be implemented, as soon as contract negotiations begin this year. The tax officially goes into effect in 2018.

Bloomberg BNA: … paths such as legislation to extend various tax breaks—known as the “tax extenders” bill—will need to be explored, Heller said during an event hosted by the Alliance to Fight the 40, a group opposing the Cadillac tax. Heller and Sen. Martin Heinrich (D-N.M.), who also spoke at the event, introduced the Middle Class Health Benefits Tax Repeal Act of 2015 in September (S. 2045) (181 DTR G-1, 9/18/15). Rep. Frank Guinta (R-N.H.) said during the event that he thinks including a repeal of the Cadillac tax in the tax extenders package “makes the most sense.” Guinta introduced the Ax the Tax on Middle Class Americans' Health Plans Act (H.R. 879) in February.

Inside Health Policy: Courtney [spoke] at a press conference organized by the “Alliance to Fight the 40,” a cross-industry coalition to end the so-called “Cadillac tax” before it takes effect in 2018 … Business groups say employers are already cutting back employee benefits and worry about taking funds out of retiree benefits to pay for the tax. The Alliance to Fight the 40 points out that while the “Cadillac tax” was expected to hit only 3 percent of plans in 2018, other projections show it could hit 19 percent of plans in 2018 and nearly half of plans in 2022.

The Alliance to Fight the 40 is a broad based coalition comprised of public and private sector employer organizations, consumer groups, patient advocates, unions, health care companies, businesses and other stakeholders that support employer-sponsored health coverage. This coverage is the backbone of our health care system and protects over 175 million Americans across the United States. The Alliance seeks to repeal the 40% tax on employee health benefits to ensure that employer-sponsored coverage remains an effective and affordable option for working Americans and their families.

For more information on the 40% Tax on Health Benefits, visit our website at or follow us on Twitter @Fightthe40.

Thursday, November 19, 2015

American Benefits Council: Evaluating the Impact of the 40 Percent ‘Cadillac’ Tax on Plan Sponsors and Participants: Analyzing Economic Research

November 18, 2015| BBP 2015-9

Evaluating the Impact of the 40 Percent ‘Cadillac’ Tax on Plan Sponsors and Participants:
Analyzing Economic Research

Beginning in 2018, Internal Revenue Code Section 4980I – as added by the Affordable Care Act (ACA) – imposes a nondeductible excise tax on employers, health insurance issuers, and/or entities administering plan benefits if the value of applicable employer sponsored coverage exceeds a specified annual limit. This tax, commonly known as the “Cadillac Tax,” is equal to 40 percent of the aggregate value in excess of the annual limit.

Numerous recent studies have attempted to quantify the practical effect of the tax on employer-sponsored coverage and have reached different conclusions. Among the most significant findings are:

·        Under the scenarios examined, a very large percentage of workers (and their families) are enrolled in plans that will trigger the tax – even though the original intent of the 40% tax on health benefits may have been to target only “overly rich” plans.

·        Middle income workers affected by the excise tax will experience significant reductions in benefits and will bear an increased tax burden that is a greater proportion of their income than for high and low income groups.

The Council’s analysis of these studies demonstrates that the tax will almost certainly increase taxes or costs – or both – for employers and employees. The Council strongly recommends lawmakers acknowledge these projections and act immediately to repeal the tax.



This tax was included in the ACA to raise revenue to pay for other provisions and dampen the rate of increase in health care spending by curtailing “overly generous” health coverage. In so doing, the authors sought to “bend the cost curve” downward.

The tax is currently estimated by the Congressional Budget Office (CBO) to generate $91 billion in revenues over the next ten years. Roughly three-fourths of this revenue is anticipated to come not from the tax itself but from employers reducing health care expenditures (currently excluded from payroll and income taxes), and correspondingly increasing taxable compensation by an equivalent amount, thereby generating higher income tax revenues. (This is a controversial assumption that comports with standard economic theory and a variety of econometric studies, but contrasts with the expectations of many employers.) The other one-fourth of the assumed revenue would be attributable to plan sponsors maintaining benefit levels and triggering and paying the tax.

Pursuing cost containment through a tax imposed on insurers and self-insured plans was a political compromise that enabled the sponsors of the legislation to achieve their dual objectives (raising funds and “bending the cost curve”) without explicitly altering the current tax treatment of employee benefits. Sponsors are theoretically free to continue to provide tax exempt benefits at a level of their choice, with the tax paid by the entity underwriting the coverage. In reality (as anticipated by the revenue estimates and recent studies) the provision will effectively impose a cap on the health benefits provided by employers, as most employers redesign their plans, to the extent possible, to avoid the tax.

To better understand the impact of the excise tax it is important to evaluate (1) the number of employers expected to be affected and (2) the distributional impact on individuals at varying income levels. These are the subject of two recently released analyses.

Kaiser Family Foundation: How Many Employers Will Be Affected?

In an August 2015 Issue Brief, How Many Employers Could Be Affected by the Cadillac Plan Tax, the Kaiser Family Foundation (KFF) used the 2015 Kaiser/HRET Employer Health Benefits Survey (EHBS) to look at self-only plan costs and estimate the proportion of employers with costs that would exceed the thresholds between 2018 and 2028. The paper considers two scenarios: (1) imposing the tax on the aggregate cost of premiums, Health Savings Accounts (HSAs) and Heath Reimbursement Accounts (HRAs); and (2) including Flexible Spending Accounts (FSAs) in the applicable health benefit costs.

The analysis finds that for the lower applicable set of costs (premiums, HSA and HRA), 16 percent of employers would have at least one plan that would be subject to the tax in 2018, increasing to 36 percent by 2028. Including FSAs in the applicable costs would raise the share of affected employers to 26 percent in 2018 and 42 percent by 2028. Among firms with more than 200 workers the proportion with a plan above the thresholds is estimated to be 46 percent in 2018 increasing to 68 percent by 2028.

Share of Employers with At Least One Plan Hitting Threshold
Self-only coverage threshold
Scenario 1: Premium + HSA + HRA
Scenario 2: Premium + HSA + HRA + FSA
Premium + HSA + HRA + FSA, Companies with 200+ workers

It is important to remember that these are the number of employers offering health benefits that are estimated to have at least one of their plans affected by the tax. The proportion of workers will be different and could be either more or less than these numbers depending on the frame of reference. Among those working for firms now offering benefits the proportion could be higher because larger employers typically provide more generous benefits (as evidenced by the above-referenced higher number of plans sponsored by larger employers that will trigger the tax).

Urban Institute: Cadillac Tax vs. Capping the Exclusion

The second analysis provides an evaluation of the distributional outcomes that are projected to result from two potential policy approaches for achieving cost containment and raising revenue.

The Urban Institute’s October 2015 study, The ACA’s“Cadillac Tax Versus a Cap on the Tax Exclusion of Employer-Based HealthBenefits: Is This a Battle Worth Fighting?, uses simulations to evaluate the impact on various income segments with respect to both the 40 percent tax and the theoretical imposition of a cap on the tax exclusion of employer sponsored health benefits at the same thresholds.

This study finds the impact of the tax will be unevenly felt across the income distribution in complicated ways. If employers reduce benefits to avoid the tax and adjust cash compensation upward in an amount equal to the reduction in benefits, the analysis concludes that most of the increased tax revenue (about two-thirds) will come from the top 40 percent of the income distribution. This is largely because this group has much higher income tax rates that will result in much higher revenues from an equivalent amount of shift in compensation from health benefits to taxable income. The simulations indicate that in 2020, among those in the middle 60 percent of the income distribution (the 2rd to 4th quintiles) that are affected can expect to experience an increase in income tax liability that will average from $453 for the 2nd quintile to $858 for the 4th quintile. These tax increases are the net value of the shift in the compensation package from health benefits to taxable income, indicating that the expected loss in health benefits will be several times these values – although the study does not report these numbers.

The evaluation of an alternative scenario in which sponsors chose to retain benefit levels and therefore incur and pay the tax indicates a somewhat more regressive distribution of costs with about two-thirds of the tax-related costs falling on the middle 60 percent of the income distribution.

Additionally, the imposition of a direct cap on the tax exclusion would result in the distribution of costs essentially equivalent to the outcomes projected for the tax. Thus the Urban Institute authors assert that capping the exclusion represents a better policy because it would have more direct and certain distributional effects while achieving the same cost-containment and revenue outcomes.

In considering analysis about the distributional effects of the 40 percent tax, it is important to bear in mind that this study and an earlierevaluation of the tax undertaken by the Tax Policy Center (a research entity jointly managed by the Urban Institute and the Brookings Institution) indicate that the proportion of the tax imposed on middle-income groups exceeds their current share of income and federal tax liability and will therefore increase their relative tax burden.

Specifically, the studies estimate that if employers reduce health benefits to remain below the excise tax thresholds, in the first year nearly 25 percent of all new taxes resulting from the provision will fall on the middle one-fifth of taxpayers, a group that receives only about 14 percent of income and pays 11 to 12 percent of federal taxes according to the most recent CBO analysis.


Proponents of the 40 percent tax may point to the CBO estimate and economic theory to support the assertion that the tax will “bend” the health care “cost curve” while raising a significant amount of revenue. But these two studies illustrate the more immediate and widespread threats to middle class workers posed by the tax.

The tax is likely to hit a significant percentage of employers as soon as it goes into effect, with that percentage rapidly growing as the years pass. Although much of the dollar value of the tax will fall on higher income groups, this is largely due to their higher income tax rates. As the studies show, the tax will result in the loss of thousands of dollars of employer sponsored health benefits and increased taxes for many workers at all income levels leaving them measurably worse off. The effect on various income groups will be unpredictable but likely to be disproportionately felt by those with moderate incomes.

No matter what approach Congress chooses going forward to address health care costs, the strategy should begin with repeal of the 40 percent tax.

Thursday, November 12, 2015

Coverage for 175 Million Americans at Risk

As seen in today's California Healthline, a great piece from Katy Spangler with the American Benefits Council:

Coverage for 175 Million Americans at Risk

While the Cadillac tax sounds like it applies to a small handful of individuals with luxurious health coverage, the truth is the health care that 175 million Americans like and want to keep is at risk because of this tax. Hardest hit will be retirees, low- and moderate-income families, public sector employees, small businesses and the self-employed. The tax must be repealed.

The Cadillac tax is a 40% non-deductible excise tax on the value of employer-sponsored health coverage that exceeds certain benefit thresholds -- initially, $10,200 for self-only coverage and $27,500 for family coverage in 2018.

The tax was clumsily constructed and thus penalizes employers for factors that are completely out of their control, impacting employers that have a higher number of disabled workers, unusual cases of high-cost cancer, premature babies or larger families, for example. Employers with locations in high-cost areas or in specific industries, such as manufacturing or law enforcement, are also unequally targeted by the 40% tax. Every year an increasing number of moderate health plans will be subject to the tax because it is indexed to the consumer price index, which is lower than health care inflation. In fact, 82% of employers believe their plans will be affected by the tax within the first five years of implementation.

It is urgent that Congress repeal the 40% tax as employers are already taking steps to avoid it by cutting benefits and changing plan designs. A recent study found employers are increasing deductibles and implementing other cost-sharing programs right now, in 2015, to avoid being on a trajectory to trigger the tax when it goes into effect in 2018.

Supporters of the tax argue it is necessary to drive down health care costs -- but the reality is the tax does nothing to make health care more affordable. It is not decreasing the cost of hip or knee replacements or prescription drugs. It is merely forcing employers to shift costs to employees in the form of higher deductibles and copays. 

Thankfully, a majority of members of Congress agree the tax should be eliminated and have cosponsored bills to repeal the tax. This bipartisan group recognizes the harmful impact the tax is already having and will continue to have on their constituents. Congress can't wait -- the time to repeal the tax is now.

Wednesday, October 28, 2015

Huffington Post: Repeal the "Cadillac tax" to protect quality health benefits

Repeal the "Cadillac tax" to protect quality health benefits
Posted: 10/27/2015 5:22 pm EDT 
Since the Affordable Care Act became law in 2010, our nation has expanded health insurance coverage to millions of American families who previously lacked coverage. As a member of Congress, I gladly supported the law, which banned the practice of denying coverage to people with pre-existing conditions, closed the prescription drug 'donut hole' for seniors, and created subsidies for affordable coverage.
During the debate over this landmark law, economists advanced a controversial tax provision known as the "Cadillac tax," by billing it as a cost-containment strategy. The proposal would tax health insurance premiums over a set threshold, limiting health care spending by discouraging lavish health insurance plans enjoyed by the top one percent--CEOs and highly-paid executives. In reality, the tax will punish working families, older workers, and women--particularly those who live in more expensive regions of our country.
I am leading a bipartisan coalition of legislators, in partnership with an unprecedented breadth of allies in the business, labor, and health policy communities, to repeal this flawed section of the law--leaving intact the beneficial structure that has accomplished so much. .
In the five years since I initially led opposition to the Cadillac tax, the true impacts of this unfair provision on older workers, women, and families in high-cost regions have become clearer. Top actuarial firms including TowersWatson have concluded that these factors, not generosity of health benefits, play a much larger role in determining the cost of health insurance premiums.
Fundamentally, the tax on high-cost health plans will degrade the quality of insurance plans available to employees of all stripes--teachers, emergency personnel, factory workers, and a myriad of others who may have negotiated for better health insurance plans by forgoing wage increases in the past. More than 70 percent of employers polled recently confirmed that they were already seeking out alternative coverage options--lower quality plans with sharply higher out-of-pocket costs--to avoid incurring the tax in 2018.
Because the Cadillac tax will undercut benefits and punish employees who participate in FSA and HSA plans--those contributions count toward the threshold--patients will bear more up-front costs when they seek out medical care. That means more patients will forgo primary care, routine checkups, and treatment at the first signs of illness.
A new study from the National Bureau of Economic Research confirms that consumers faced with higher deductibles will seek less health care of all kinds, including medically necessary care. Doctors at Lawrence + Memorial Hospital in New London, Connecticut highlighted this challenge for patients during my recent visit to the Women's Health Center. They have seen a significant percentage of patients whose mammograms (which are cost-free under Affordable Care Act changes) detected potentially cancerous tumors fail to return for additional diagnostics, citing the costs associated with the testing. Clearly, the Affordable Care Act was intended to expand access to cancer screenings and preventive treatment for women--not to shift more patients to high-deductible plans that require greater out-of-pocket spending.
Since patients generally are not medical professionals--and the health care market is opaque to consumers seeking price information for particular services and treatments--they are ill equipped to determine the value of health care services. If the goal of the Cadillac tax is to reduce superfluous health care spending, as its proponents assert, then it will also reduce necessary health care spending, which leads to poorer outcomes for patients.
The Affordable Care Act has made great strides in rewarding health care providers for value, rather than quantity, of care. As a result, providers are seeking to contain costs while improving outcomes for patients. The Cadillac tax would disincentivize valuable care, as consumers are forced to decide whether or not to make a costly visit to the doctor. The tax is a blunt, indiscriminate instrument that must be repealed as soon as possible before it reduces access to necessary care, and damages the important progress we have made in reducing uninsured rates and intelligently bending the cost curve of health care spending.

Friday, October 16, 2015

Fight the 40 Urges Congress to Repeal the Cadillac Tax

On October 15th, the Alliance to Fight the 40 urged Congress to repeal the 40% tax on health benefits and protect the health care that safeguards 175 million Americans. 

The Alliance to Fight the 40 is a broad-based coalition of employee and employer organizations representing or providing health coverage to Americans in every state. 

The Affordable Care Act imposes a 40% non-deductible tax (also called the “Cadillac tax”) on the cost of employer-sponsored health coverage that exceeds certain thresholds. This tax will impact a wide range of plans covering retirees, small businesses, self-employed individuals, state and local governments as well as non-profit organizations.

Numerous studies show that the 40% tax is forcing employers to shift costs to employees in order to avoid the tax. This increased cost-burden is falling hardest on those least able to afford it – lower-income, sicker and older workers. The increased cost burden for employees may jeopardize employees’ access to affordable care and therapies.

To date, 257 House members and 30 Senators have cosponsored legislation to repeal the 40% tax. Congress must act now to repeal the 40% tax, and protect employer-sponsored insurance coverage for millions of Americans.

Senate Letter: 
House Letter: 

For more information check out our website: or follow us on Twitter @fightthe40.

Wednesday, October 14, 2015

ICYMI: Letter to the Editor by Rep. Joe Courtney (D-CT) NYT: End ‘Cadillac’ Health Tax

The Opinion Pages | LETTER
End ‘Cadillac’ Health Tax
OCT. 14, 2015

To the Editor:

Re “Don’t Repeal the Cadillac Tax,” by Ezekiel J. Emanuel and Bob Kocher (Op-Ed, Oct. 2): Proponents of the so-called Cadillac tax cite its potential to curtail health spending and raise significant revenue as arguments to keep this provision in place.

In 2009 and 2010, it was billed as a tax on only the most expensive and lavish health plans, those enjoyed by high-paid chief executives. But the reality facing workers and employers today demonstrates that older workers, women and employees in high-cost regions will bear the brunt of this tax penalty.

The Affordable Care Act was intended to expand access to quality health insurance and care while controlling costs by rewarding value instead of quantity. By penalizing contributions to flexible spending accounts and on-site wellness clinics, and encouraging higher deductibles — which will deter patients from seeking preventive and primary care — the Cadillac tax undermines those goals.

Finally, the theoretical $91 billion in revenue generated by the Cadillac tax is a pipe dream. According to the Congressional Budget Office, three-quarters of that revenue would be generated through income and payroll taxes. I challenge Dr. Emanuel to find an average worker who believes the theory that employers would issue broad wage increases to compensate workers for reduced health benefits.

The Cadillac tax is bad policy that creates bad incentives in our health care system. That is why I am leading a bipartisan effort in the House to repeal the Cadillac tax before it damages the progress we have made since the Affordable Care Act was signed into law.

Vernon, Conn.

The writer, a Democrat, represents Connecticut’s Second District.

ICYMI: A ‘Cadillac’ Tax That Looks Like a Lemon | Commentary

A ‘Cadillac’ Tax That Looks Like a Lemon | Commentary

By James A. Klein and Terry O’Sullivan
The Affordable Care Act was passed with the intention of fixing several parts of our health care system: rising costs, growing ranks of uninsured and exclusions for pre-existing conditions. And now, a strong bipartisan group of congressional lawmakers is standing up to prevent unintended harm to employees’ health and health coverage.
Health reform was supposed to fix what was broken, not dismantle the employer-based health system that successfully covers more than 175 million Americans. As representatives of businesses and working people, we see the 40 percent “Cadillac tax” on health benefits as a serious attack on our shared future.
The term “Cadillac tax” falsely suggests it only affects plans with “excessive” benefits. In fact, it would hit plans that are expensive simply because they cover people with higher than average costs: women, older and disabled workers, and families experiencing catastrophic health events. That was not Congress’ intent when it passed the law.
Democrats and Republicans do not agree about much when it comes to the Affordable Care Act. But both Secretary Hillary Rodham Clinton and House Ways and Means Committee Chairman Paul D. Ryan have called for repeal of the Cadillac tax. The reason is simple: the tax is flawed both conceptually and in its construction. The cost point that triggers the tax is based on the Consumer Price Index. But Congressional Budget Office estimates show health costs will rise more than twice as fast as general inflation over the next decade. A Towers Watson survey found that 48 percent of employers expect at least one plan could trigger the tax in 2018, when it goes into effect, and fully 82 percent just five years later.
But by no means is this just a 2018 problem. The impact is being felt right now. Aon Hewitt reports that one-third of employers who have determined the impact of the tax are increasing out-of-pocket costs this year to avoid a trajectory that will trigger it in the future. Likewise, the CBO acknowledges employers will seek to avoid the tax by reducing benefits. Yet studies show that many patients forego needed care when faced with higher out-of-pocket costs. This is why further delay of this tax is not a solution; it must be repealed now.
The tax also fails to account for enormous variations in health costs. A study by Milliman found that geography had a potential 69.3 percent impact on premiums — noting that a health plan costing $9,189 annually in one part of the country could cost $15,556 elsewhere. Ironically, high value plans in lower cost locations avoid the tax, while lesser value plans in higher cost areas are subjected to it.
Analysis by Ernst & Young shockingly demonstrated that in certain high-cost states such as Georgia, Alaska, West Virginia and Wyoming, a silver-level plan in the small business exchanges will trigger the tax in 2018 or shortly thereafter. Clearly, Congress did not intend to tax plans paying 70 cents of every dollar in covered services — plans that the ACA expressly requires be offered to small employers.
Assumptions underlying the estimated $91 billion to be generated by the tax are also concerning. The CBO projects three-quarters will come from employers replacing health benefits with taxable wages. If the CBO is correct, working Americans will be asked to pay more. If the CBO is wrong, the revenue may never materialize and employees will lose valuable benefits without a corresponding increase in pay.
Rep.  Joe Courtney, D-Conn., has authored a bipartisan bill to repeal the tax. Along with a measure introduced by Rep. Frank C. Guinta, R-N.H., far more than a majority of House members have co-sponsored legislation to eliminate the tax. Momentum is building in the Senate, as well, as Sens. Dean Heller, R-Nev., and Martin Heinrich, D-N.M., recently introduced a companion to the Courtney bill, and Sen. Sherrod Brown, D-Ohio,  just released his repeal proposal. Both bills are joined by several cosponsors, so it is also a very bipartisan effort in the Senate.
How to improve the health system is the subject of continued debate. In the case of the “Cadillac tax,” Congress and the Obama administration can come together now in a bipartisan fashion to do what is right for working people and businesses and repeal the tax. They should act without delay.

James A. Klein is president of the American Benefits Council, whose member companies sponsor or administer health and retirement plans covering millions of Americans. Terry O’Sullivan is general president of the Laborers’ International Union of North America, representing a half-million members in the construction industry. Both groups are among the organizers of the Alliance to Fight the 40, a diverse coalition of public and private sector employers and labor unions.

Tuesday, October 13, 2015

WSJ: The 'Cadillac Tax' Makes Everyone Sick

The 'Cadillac Tax' Makes Everyone Sick
By Tevi Troy
13 October 2015
The Wall Street Journal

In apparent recognition of the distinct unpopularity of the Affordable Care Act's Cadillac tax -- an excise tax on high-value, employer-provided health benefits -- more than 100 economists have signed a letter defending it. As the Washington Post headline about the letter read: "101 Economists Just Signed a Love Letter to the Obamacare Provision Everyone Else Hates."

As of 2018, the excise will impose a 40% levy on employer-sponsored health plans whose value exceeds $12,500 for an individual and $27,500 for a family. The definition of value includes all benefits, such as wellness plans or employer contributions to flexible spending accounts, and the tax is intended to get employers to reduce the benefits these high-cost plans confer (and perhaps even to encourage employers to stop providing health care to employees so they migrate toward the ACA exchanges). Some 175 million Americans are enrolled in employer-sponsored health plans, and the tax will affect increasing numbers of plan holders. This is why the tax is so widely disliked, even before anyone is directly affected by it.

The Cadillac tax is so disliked that politicians and interest groups on both sides of the aisle want to get rid of it. 

There are few health-care issues that unite Hillary Clinton and Bernie Sanders with congressional Republicans, or unite unions with business, but opposition to the excise tax is one. Mrs. Clinton and Mr. Sanders have declared their opposition to the tax, while multiple congressional bills would eliminate it.

The reason the tax has so many opponents is its impact on American workers. It is going to force employers, who understandably do not want to pay the steep 40% levy, to reduce the benefits they offer in order to bring the costs of their plans below the ACA's value threshold.

Worse, because the thresholds at which the tax kicks in for individuals and families are indexed to overall inflation and not to faster-rising health-care costs, the tax will have a creeping impact on employees. Like the dreaded Alternative Minimum Tax, which was designed to hit fewer than 155 wealthy Americans in 1969 but now impacts 4.2 million households with incomes of $83,400 or more, the Cadillac tax will pull more and more Americans into its net.

According to a new study by the American Health Policy Institute, the excise tax is already forcing American employers to revisit the health care they provide to employees. Almost 90% of large employers surveyed by AHPI reported taking steps to prevent their company from having a plan that triggers the excise tax in 2018.

Nineteen percent of those surveyed -- top human-resource officers at companies with more than 1,000 employees -- said they were already curtailing or eliminating employee contributions to flexible-spending accounts to avoid triggering the tax. Nearly 13% were already curtailing or eliminating employee contributions to health savings accounts. Both FSAs and HSAs are popular ways for employees to cope with the increasing number of high-deductible health plans, as they allow workers to save for growing out-of-pocket health costs.

When employers respond to the tax by shrinking the value of employee health plans, that amounts to a reduction in the overall compensation package employees are getting. Supporters of the tax theorize that workers will get wage increases to offset the fact that their benefit package has been reduced. In reality, 71% of large employers surveyed by the American Health Policy Institute said they probably wouldn't increase wages to offset their reduction in health benefits. Among the 16% of employers who said they would increase wages, their workers are not necessarily better off: Unlike the lost benefits, wage increases will be subject to income tax.

Providing some kind of limit to the amount of the tax advantage employers get for providing health care to employees could make some sense if it were designed the right way -- for instance, by making some portion of employer-provided health benefits taxable above a certain income ceiling, without penalizing lower-wage employees. But the consistent unpopularity of the proposed excise tax and the bipartisan efforts to eliminate it reveal that American people of all incomes understand better than the 101 economists the costs of the Cadillac tax and the damage it would do.

Mr. Troy is the president of the American Health Policy Institute and a former deputy secretary of the Department of Health and Human Services in the George W. Bush administration.