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Junk the ACA ‘Cadillac tax’

For five years, Republicans lobbed every criticism imaginable at the Affordable Care Act, while Democrats defended it against every critique. Now that the U.S. Supreme Court has ruled in what is likely the final major legal challenge to healthcare reform, it’s time for leaders of both parties to put politics aside and start the real work of ensuring the law fulfills its promise. 

Members of our respective unions have fought long and hard for high-quality, affordable health coverage for their families, often at the expense of wage increases. We support the ACA as a major step toward ensuring all Americans have that same security. But like Medicare and Medicaid before it, the ACA needs tweaks to really deliver for working families. 

{mosads}So we’re glad presidential candidates are looking not only at the benefits of ACA but also at the aspects that need fixing. And we’re glad that fixing the ACA is becoming a bipartisan issue. Congressional coalitions led by Reps. Joe Courtney (D-Conn.) and Frank Guinta (R-N.H.) are taking on one of the clearest of the ACA’s flaws: a 40 percent excise tax on health benefits above $10,200 for individuals and $27,500 for families. 

The 40 percent tax creates a huge incentive for employers to cut costs by cutting benefits and shifting costs onto workers. Even though the tax won’t go into effect until 2018, employers already are slashing benefits in anticipation of it, forcing millions of families to become seriously underinsured. This is possibly the ACA’s most dangerous trend.

Defenders of the 40 percent tax offer four misguided arguments:  

Don’t worry, it won’t affect you. Billed as a “Cadillac tax” that targets only luxury plans, the 40 percent tax is anything but. Surveys by benefits consultant Towers Watson found that half of employers expect to trigger the tax in 2018, with more than 80 percent on track to hit the threshold within five years. 

Don’t worry, your pay will go up. Even if workers find their out-of-pocket costs increasing, employers supposedly will pass the “savings” on to workers in the form of higher wages. This flies in the face of history. Wage stagnation has persisted for 40 years, while in just the past eight years, average inflation-adjusted deductibles for single coverage have skyrocketed by 90 percent. Workers don’t have the bargaining power to claim their fair share of income, and the continuing attacks on collective bargaining will only make it worse.   

It helps lower health care expenditures. At its best, the ACA is designed to lower costs by improving health outcomes. But by taxing premium costs, the excise tax does nothing to incentivize plans to improve health outcomes. What it does is encourage employers to shift costs onto workers. Bearing more costs, there is a legitimate concern that workers will skip out on needed care until they are seriously ill, driving up costs throughout the system. The relatively small gain in revenue from the tax could be more than eaten up by larger general health care cost growth. Shifting costs to already struggling families is a dangerous and ineffective way to control costs.   

Americans use too much healthcare. Behind the rhetoric about overly generous “Cadillac” plans is the belief that working families overuse health care because their insurance covers too much. This is simply not the case. When our members seek chemotherapy, for instance, they do so because they are sick, not because their insurance covers the cost. The goal of healthcare reform should not be to discourage utilization, but to provide coverage when people need it most.  

In reality, the cost of health plans varies dramatically for many reasons. Geography and the age, gender and health status of plan participants affect premiums. A plan in Connecticut, for instance, could face the excise tax, while the exact same plan in West Virginia would not. 

Working on the frontlines of education, healthcare, government and service industries, our members value their benefits. Teachers and health care providers are the first responders to nearly every new disease that enters our communities. And, next time you stay in a nice hotel, try flipping your 100-lb. mattress 20 times and experience firsthand why so many hotel housekeepers deal with job-related injuries. A single accident can devastate a family and drive a plan’s premiums through the roof. Millions of working Americans depend on good health insurance to protect their families and to squeeze the most out of shrinking or stagnant paychecks. 

The two excise-tax repeal bills under consideration have more than 200 bipartisan co-sponsors between them. And the 2016 presidential election may spur a serious discussion about preserving the best and fixing the worst of a landmark law. It’s a good start to fixing a great law. Let’s get to work.

Weingarten is president of the American Federation of Teachers (AFT); Saunders is president of the American Federation of State, County and Municipal Employees (AFSCME); , Taylor is president of UNITE HERE.


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