Health Care Reform

ACA Excise Tax Repeal Gains Momentum in the U.S. Senate

Oct 2, 2015
Two legislative proposals have been introduced in the Senate to repeal the Affordable Care Act’s (ACA’s) 40 percent excise tax on high-value, employer-sponsored health care plans. These bills join similar measures pending in the House, teeing up this bipartisan issue for possible action in 2016.

Last month, Sens. Dean Heller (R-Nev.) and Martin Heinrich (D-N.M.) introduced the bipartisan Middle Class Health Benefits Tax Repeal Act of 2015 (S. 2045), while Sen. Sherrod Brown (D-Ohio) also introduced the American Worker Health Care Tax Relief Act of 2015 (S. 2075). In addition to calling for a repeal of the excise tax, Sen. Brown’s bill includes legislative text stating that the revenue loss resulting from the repeal of the excise tax should be offset in some way to ensure that the ACA continues to reduce the deficit while improving health coverage for millions of Americans. The Congressional Budget Office has estimated that the ACA excise tax provision will generate $91 billion over 10 years.

The excise tax, also known as the “Cadillac tax,” is scheduled to go into effect in 2018. The tax is applicable to certain employer-sponsored group health plans that cost more than $10,200 per year for individuals and $27,500 per year, applying a 40 percent tax to the cost above those limits. As currently structured, the tax is designed as an incentive to lower the value of traditional employer-sponsored health plans. The aggregate cost of coverage is calculated based on applicable employer-sponsored benefits, including but not limited to:

  • Total premium paid by employer and employee (but not deductibles, coinsurance or co-pays if paid for with after-tax dollars) for medical and prescription drug coverage
  • Dental and vision coverage, if not stand-alone plans
  • A wellness program or onsite medical clinic that provides more than de minimis benefits (such as workplace health, flu shots and care only to employees) and an employee assistance program (EAP)
  • Employer and employee contributions to health flexible spending account (health FSA), health reimbursement arrangement (HRA) and health savings account (HSA), except for after-tax employee HSA contributions.
SHRM supports legislative efforts to repeal the excise tax. As such, SHRM distributed letters of support for S. 2045 and S. 2075 to the Senate Finance Committee, with jurisdiction over this issue. In the U.S. House of Representatives, two legislative proposals have also been introduced to repeal the excise tax. Rep. Joe Courtney (D-Conn.) introduced the Middle Class Health Benefits Tax Repeal Act of 2015 (H.R. 2050) and Rep. Frank Guinta (R-N.H.) introduced a similar proposal, the Ax the Tax on Middle Class Americans' Health Plans Act (H.R. 879).

While the anticipated ACA excise tax is gaining traction on Capitol Hill, it is critical that HR professionals reinforce that message to lawmakers about the need to repeal the tax. More specifically, it is important that lawmakers hear from HR professionals in their states and congressional districts about how the anticipated excise tax will negatively impact employers and employees alike.

To encourage your U.S. congressional members to co-sponsor these repeal bills, SHRM's government affairs team has prepared a template letter on the HR Policy Action Center. Once accessed, the message can be edited, personalized and sent directly to your lawmaker’s Washington, D.C., office. Lawmakers need to hear how the anticipated excise tax will impact your organizations and their employee health care offerings.

Click HERE to send your letter now to support repeal of the ACA excise tax.

In this Issue

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