Delay of ObamaCare's 'Cadillac Tax' goes down to the wire

Lawmakers are debating the size of a year-end tax package that could include a delay of ObamaCare’s “Cadillac tax,” with the talks going down to the wire.

A senior GOP lawmaker on Monday said action on the Cadillac tax would depend on whether negotiators reach a broad tax deal, or instead fall back on a narrower package.

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Scaling back the Cadillac tax has support on both sides of the aisle. Democrats, in particular, have taken aim at the 40 percent tax on high cost health plans, which unions fear will end up shifting health costs onto workers when it takes effect in 2018.

But whether lawmakers succeed in delaying the tax — and easing a separate excise tax on medical devices also created by the healthcare law — could depend on negotiations over provisions unrelated to healthcare.

House Democratic Leader Nancy Pelosi (D-Calif.) wants to index the child tax credit in the “tax extenders” package so that it rises with inflation.  

“We are not going to accept Pelosi's insistence on indexing of the tax credits,” the senior GOP lawmaker said Monday. “If that insistence continues, [the] deal will fall apart and likely fall back to [a] past, standard year end package.”

“That would mean delay of Cadillac tax and medical device delay would all fall out of the package,” the lawmaker added.

A smaller year-end package would simply extend the expired tax breaks, while a larger deal would make some of them permanent and bring in other issues such as the delay of the Cadillac tax. 

Pelosi on Monday expressed doubts about a larger deal in a letter to colleagues. 

“The indexing has been rejected by the Republicans,” she wrote. “During the Caucus meeting last week, it was clear that, in the absence of a balance between working families and business provisions, the permanent bill was on a dangerous path of being too large for Members to support.” 

She said members would discuss the issues at their meeting on Tuesday.   

Lawmakers are also considering changes to ease ObamaCare’s Health Insurance Tax (HIT) as part of the tax package, according to a lobbyist and a congressional aide. 

Health insurers have long pushed for repeal of the tax, arguing its cost is passed on to consumers in the form of higher premiums. The government is expected to bring in an estimated $100 billion from the tax over 10 years. 

Easing up on the tax in the package of tax breaks known as “tax extenders” could be a way to try to lower premiums under the healthcare law, which have recently drawn a renewed round of scrutiny.  

A source said the changes could be a cancellation of the insurer tax in 2018, or relief could be split across 2018 and 2019, though negotiations are still in flux. 

Republicans have long been in favor of repealing the HIT, and there has been some Democratic support as well. A bill in the House to abolish the tax has 228 Republican co-sponsors and seven Democratic cosponsors.  

Sources also say that Democrats pushed for help for insurers under ObamaCare’s “risk corridor” program, possibly including a new tax credit to help insurers with heavier losses.  

The program, meant to provide a cushion for insurers against losses in the early years of the healthcare law, has been unable to bring in enough money to meet insurers’ requests for payouts.  

Republicans, though, have strongly objected to the program as a “bailout” for insurers, and a source said more help for insurers under the program in the year-end packages appears unlikely.

Scott Wong and Sarah Ferris contributed.