NAHU called on members to take action on our latest Operation Shout to permanently repeal the ACA’s Cadillac Tax. Last Wednesday, Senators Mike Rounds (R-SD) and Martin Heinrich (D-NM) introduced S. 684, and in January, Representatives Joe Courtney (D-CT) and Mike Kelly (R-PA) introduced H.R. 748. NAHU has been a leading advocate for a full repeal of the tax, and in the interim, the recent delays of tax signed into law in 2015 and 2018. However, we continue to stress the importance of fully repealing the tax as Americans see drastic cuts to their health insurance benefits as employers begin planning for the tax to take effect.|
The Cadillac Tax calls for 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 1% initially and then CPI. Given that the pace of medical inflation is well beyond that of general inflation, the tax is destined to outgrow itself in short order and many employers will be impacted by the cost of the tax and the enormous compliance burden that the tax creates. It is estimated that as many as 60% of employers will be hit when the tax is due to take effect in 2022. Because of the projected wide reaching effect of the tax, many employers may be deterred from offering coverage, including HSA-compatible plans, wellness programs or onsite clinics.
Employers are making plan-design decisions years in advance as a way to avoid making drastic changes in their employees’ benefits when the tax is set to take effect. Many employers will attempt to find ways to avoid paying the tax as much as possible, which could mean offering less generous coverage (part of the intent of the tax) but also shifting the burden onto the employees/consumers of care. This could be through higher co-pays and co-insurance or by making employees pay a greater portion of the premium—trends that we are already seeing even without the tax. The tax would exacerbate this and put greater pressure on already stretched consumers.
Other plan-design changes being considered by employers include making cuts to cost-containing elements like on-site clinics, HSAs and FSAs, as the tax takes into account all components of a plan. Employers also have to contend with things outside of the plan’s control like family size, state benefit mandates, geographic rating, age, health status and the size of the employer, meaning that many plans could exceed the threshold without necessarily being benefit-rich. The intent of the tax is to discourage rich benefit plans, but even moderate plans could be subjected, forcing Americans to face greater cost-shifting with each subsequent year.
Additionally, employers with collective bargaining agreements need even greater lead time to plan for benefit changes than traditional employers. NAHU has found that many of these employers have already begun reducing benefits and increasing cost-sharing on employees. Increasing cost-sharing harms lower-income and middle-class Americans the most, as they are least prepared to handle the higher premiums and deductibles, often resulting in delayed treatment that costs more in the long term.
Contact your senators and representative. Send an Operation Shout today asking your legislators to support H.R. 748 and S. 684 before any more harm is done to the health insurance coverage of millions of Americans. You can also ask your clients to send an Operation Shout on how the tax will impact the coverage they offer to their employees and families.