The Senate now has a companion bill to the House bills that would repeal the Cadillac/Excise Tax under PPACA. On Thursday, Senators Dean Heller (R-NV) and Martin Heinrich (D-NM) introduced S. 2045. The House bills are H.R. 879, introduced by Representative Frank Guinta (R-NH) in February, and H.R. 2050, introduced by Representative Joe Courtney (D-CT) in April. Together, the House bills have a combined 224 bipartisan cosponsors—130 Democrats and 94 Republicans. NAHU has been a leading advocate for repealing the law’s Cadillac/Excise Tax and is a member of the Alliance to Fight the 40, a coalition of employer and industry groups working to repeal the 40% excise tax on employee health benefits.
The Cadillac Tax is set to go into effect in 2018 and will apply a 40% excise tax on the amount of the aggregate monthly premium of each primary insured individual that exceeds the year’s applicable dollar limit, which will be adjusted annually to the Consumer Price Index plus one percent. The current threshold for when the tax applies is set to $10,200 for individual coverage and $27,500 for “other than self-only” coverage. When originally conceived, it was thought that the tax would only apply to a small percentage of health plans and that most employers would be able to make choices that would allow them to avoid the tax. However, five years later, it is clear that this will not be the case. Not only will the tax disproportionately apply to employers and employees that have historically favored generous benefits over higher salaries, such as non-profit organizations, but it will also disproportionately impact employers and employees that have implemented plans that include Health Savings Accounts, those with older and/or less healthy employees, and employers in certain parts of the country based on mandated benefit requirements and medical care costs in their areas. While designed to incent employers from offering the most-benefit rich plans, in reality the tax will impact a majority of plans, including those that aren’t benefit-rich and were not the intended targets of this provision.
Furthermore, employers of all sizes will be burdened with onerous compliance requirements for the tax. As the tax can impact each plan beneficiary differently based on their family size, age, health status, geographic rating area, state mandates and other criteria, in addition to factors like which plan each individual has chosen and whether they have contributed toward an HSA or FSA, employers will be faced with having to track and record each of these individual spending levels on a regular monthly basis and reporting their liability directly to the insurer or TPA that will pay the tax on their behalf.
Keep your eyes open for an Operation Shout on the Senate bill. In the meantime, you can take action on the two House bills and ask your member of Congress to become a co-sponsor of H.R. 879 and H.R. 2050!