Tuesday marked a major milestone for legislation that would fully repeal the ACA’s Cadillac/excise Tax. H.R. 748 reached 301 co-sponsors with the addition of Ways and Means Chairman Richard Neal (D-MA), along with two dozen other bipartisan members of Congress. This exceeds the critical threshold of 290 co-sponsors that legislation needs to advance to the House floor, bypassing the often protracted process for consideration. The 290 co-sponsor threshold is a new condition adopted by the House earlier this year as part of its broader rules package that is meant to allow non-controversial measures that already have broad bipartisan support to be quickly adopted under the suspension calendar. House leadership is currently considering the process and timeline for bringing the legislation to the floor for a vote. A companion bill in the Senate, S. 684, introduced in March by Senators Martin Heinrich (D-NM) and Mike Rounds (R-SD), has 35 co-sponsors.
H.R. 748 was introduced in January by Representatives Joe Courtney (D-CT), Mike Kelly (R-PA), Suzan DelBene (D-WA) and Elise Stefanik (R-NY) and is the successor of H.R. 173 from last Congress that attracted 304 co-sponsors. NAHU and our coalition partners were tasked with regaining that critical level of support with the new Congress, including educating over 100 new legislators on the issue, with the considerable turnover among legislators who either retired or were defeated for re-election in 2018. NAHU is especially grateful for all of our members and your clients who took part in our grassroots efforts or at Capitol Conference to urge your members of Congress to support this legislation that allowed the bill to surpass 300 co-sponsors in such a short time period.
It’s important to note that co-sponsoring a piece of legislation is not an automatic guarantee that the legislator will vote in favor of the bill on the floor. In some instances, a member may support the bill conceptually and sign-on as a co-sponsor, but oppose it when it comes for a vote. Often this is because the cost of enacting the legislation is too significant and as written the bill does not have these necessary budget offsets. The repeal of the Cadillac Tax may fall into this category for some members, particularly among the two-dozen Democrats who are members of the conservative Blue Dog caucus. Further, some Republicans who are signed-onto the bill may opt not to vote in favor because it only repeals a portion of the ACA and they supported the bill on the basis that it was part of a broader effort to repeal the full law. Passing legislation through the suspension calendar requires the support of 290 votes, so there is little margin for error for the bill to be passed if co-sponsors opt not to vote in favor.
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, initially to the Consumer Price Index plus 1%, and then simply to 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.
Originally set to take effect in January 2018, the Cadillac Tax has been twice delayed, after the enactment of NAHU-supported measures and in 2015 and 2018. We strongly support legislation that will fully repeal this tax, prevent any additional cost-shifting onto employees or the cancellation of group coverage altogether as employers seek relief from the impending tax, and provide immediate relief for Americans who receive employer-sponsored insurance.