SHRM Supports New Push to Repeal ‘Cadillac Tax’

Opponents target 40 percent excise tax on high-value employer plans

By Stephen Miller, CEBS Jan 10, 2017
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While Republicans in Congress have launched efforts to repeal and replace the Affordable Care Act (ACA), a separate bipartisan push is underway to revoke one of the law's most controversial provisions—the so-called "Cadillac tax."

The 40 percent excise tax on employer-sponsored health coverage above certain thresholds ($10,200 for individual coverage and $27,500 for family coverage), now set to start in 2020, is being targeted for its own repeal, with no replacement. And with a new president to be inaugurated shortly, previous attempts to get rid of the tax, which had faced a presidential veto, may now succeed.

On the evening of Jan. 3, Representatives Mike Kelly, R-Pa., and Joe Courtney, D-Conn., introduced a bipartisan legislative proposal, the Middle Class Health Benefits Tax Repeal Act (H.R. 173), that would amend the Internal Revenue Code to repeal the unpopular tax. A counterpart Senate bipartisan bill (S. 58) was introduced on Jan. 9 by Senators Dean Heller, R-Nev., and Martin Heinrich, D-N.M.

The Society for Human Resource Management (SHRM) supports repeal of the excise tax and was supportive of similar legislative proposals introduced in the last Congress.

"If the tax goes into effect, many employers will be subject to the 40 percent excise tax, including 33 percent of SHRM members' organizations," wrote Michael P. Aitken, SHRM's vice president of government affairs, in a Jan. 4 letter to Kelly and Courtney and a Jan. 9 letter to Heller and Heinrich. Copies of these letters were sent to all members of Congress.

"While the excise tax is only intended to target high-value plans, modest plans will also be impacted," said Aitken. The Congressional Budget Office projects that health care premiums will grow by about 5 percent per year, he noted. "This means over time more employer plans will be affected by the tax simply because its thresholds are indexed more slowly than health plans' likely costs."

As a result, "if the 40 percent excise tax is not repealed, many employers may be forced to cut benefits, alter wellness and chronic care prevention programs, and reduce innovative new benefit offerings," Aitken warned. "Further, employees will be negatively impacted by higher co-pays and deductibles and [this] could even cause some to decline employer-provided health care."

[SHRM members-only toolkit: Managing Health Care Costs]

ACA Repeal Efforts Begin

SHRM anticipates that in the coming weeks, ACA repeal and replacement efforts will be initiated through the budget reconciliation process, which is limited to provisions that affect federal revenues and spending and requires only a simple majority of votes in the Senate to pass (sidestepping the expected Democratic filibusters).

"Republican lawmakers would be able to repeal the ACA mandates that individuals have coverage and that companies with 50 or more employees provide employees with affordable insurance," said Chatrane Birbal, SHRM's senior advisor, government relations. The budget reconciliation process also "can do away with the ACA's federal subsidies, eliminate funding for Medicaid expansion and cancel a multitude of ACA-related taxes," she noted.

The respective congressional committees with jurisdiction in the budget reconciliation have a drafting deadline of Jan. 27 to put forward their recommendations.

As it is doing with efforts to repeal the excise tax, "SHRM will be contacting respective committee chairmen to urge that they preserve and support the employer-sponsored system," Birbal said.

Related SHRM Online Articles:

Republicans Introduce Range of Bills to Repeal ACA, SHRM Online Benefits, January 2017

Experts Predict ACA Repeal-and-Replace Prospects, SHRM Online Benefits, January 2017

Top 7 Workplace Legal Trends for 2017, SHRM Online Workplace Law, January 2017

How Tom Price Could Transform Employer Health Coverage, SHRM Online Benefits, December 2016

Farewell Mandates? ACA Likely to Change Substantially Under Trump Administration, SHRM Online Benefits, November 2016

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