This week, Administration officials announced that the president’s proposed budget request, to be released next Tuesday, will include a provision that would alter the application of the Cadillac/excise tax. In an article written by White House Economic Adviser Jason Furman, the Administration proposes tailoring the tax to be reflective of regional differences, raising the threshold for areas that healthcare is more expensive. Instead of a single national standard, states that have an average premium for the highest tier gold plan that exceeds that excise tax threshold would have the threshold reset to the value of the average gold premium plan. The proposal is intended to help encourage employers to be able to offer coverage in states where plans are more expensive by reducing the amount of plans subjected to the tax. The proposal is projected to cost the federal government $17.7 billion in lost revenue over 10 years, according to an estimate done by the Joint Committee on Taxation and the Congressional Budget Office.
This proposal follows President Obama signing into law a two-year delay of the tax last month as part of the larger omnibus budget agreement, which also had a one-year moratorium on the health insurance tax and the medical device tax. The Administration has been alone among supporters of the tax as a necessary revenue stream to pay for the law and downplaying its impact with Treasury Department estimates that only seven percent of people with employer-provided coverage would be subjected to the tax. However this proposal, along with signing the two-year delay, may be signaling the Administration’s acknowledgement of the opposition and attempt to appease opponents while overall still retaining the tax.
Furman’s article noted that their proposal “prevents the tax from creating unintended burdens for firms located in areas where healthcare is particularly expensive, while ensuring that the policy remains targeted at overly generous plans over the long term.” Furman added that the Administration, “encourage[s] Congress to enact sensible improvements to the tax, and the[y]…believe the most important step Congress can take is to ensure that the tax goes into effect without any further delay.” In addition to the two-year delay, the Administration’s proposal follows a reconciliation package that was vetoed and failed a veto-override attempt earlier this week, but which included an amendment with near universal support to repeal the excise tax. The Senate amendment to repeal the Cadillac tax was passed by a vote of 90-10, including many leading Democratic supporters of the law as a whole.
While NAHU appreciates the effort to reduce the burden of the tax, we remain fully committed to a complete repeal of the tax before 2020, when it is now scheduled to begin. We are continuing our efforts with our coalition partners in the Alliance to Fight the 40 and the National Coalition on Benefits on efforts to pass a full repeal of the tax this year. Currently the House bills combined have the support of nearly 300 representatives and the two Senate bills have the combined support of 39 senators. The announcement this week by the Administration was countered with responses, including by Representative Joe Courtney (D-CT-2), one of the lead sponsors of H.R. 2050, who responded, “While I appreciate the willingness of the Administration to finally come forward with changes to this policy, this proposal falls short of addressing the range of concerns raised with the blunt application of the tax. I believe that any tax on middle-class healthcare plans will simply create new barriers to affordable healthcare that will undermine central goals, and ultimate success, of the ACA. I will continue to work with my colleagues in Congress to pass a full repeal of the excise tax.” His response echoed many other comments from our coalition partners, including the Alliance to Fight the 40, which responded that, "the 'Cadillac tax' cannot be fixed. It must be repealed," and by Richard Trumka, head of the AFL-CIO, who responded that, “The only real solution is a full repeal and we will not accept anything less.” You can add your voice to the push for a full repeal by sending an Operation Shout today.