Battle over ‘Cadillac tax’ heats up


Longtime opponents of the ObamaCare “Cadillac tax” met with lawmakers this week with a new message: We’re willing to compromise.

In a fly-in visit with key members and committee staff, employer benefits lobbyists went in seeking a more politically viable solution than full repeal.

{mosads}Rather than eliminating the tax entirely, they pitched exempting the contributions that are made to employers’ health savings accounts, which could otherwise be subject to the 40 percent excise tax.

The new strategy is taking shape in a presidential election cycle in which every major candidate from both parties has pledged to repeal the tax — something the Obama administration is firmly against.

“I think that while there is an overwhelming agreement that something must be done on the Cadillac tax, there is also the political reality that full repeal is going to be very difficult to do,” said Bill Sweetnam, legislative director for the Employers Council on Flexible Compensation (ECFC).

“There’s a political aspect in this that I don’t think we’ll be able to get over in the short term,” he said.

Sweetnam’s group is asking lawmakers to allow personal accounts, such as Flexible Spending Accounts (FSAs) and Health Spending Accounts (HSAs), to be excluded from the insurance excise tax. Unless that happens, he warns that those accounts — which allow people to save tax-free — will cease to exist.  

“What we’ve been telling people, if you don’t do something with health savings accounts and FSAs, employers are going to start dropping them,” he said.

So far, Sweetnam said he’s gotten no promises from lawmakers about introducing a bill, but he believes “a lot of people are looking at this as something to put in their back pocket.”

For now, many of the tax’s opponents in Congress are waiting on the GOP’s legislative package repealing major pieces of ObamaCare — including the Cadillac tax — that’s expected to reach the president’s desk this year.

While the bill is sure to be vetoed, Sweetnam and others say work on the bill is at least a step forward.

The language repealing the Cadillac tax in the reconciliation bill was written by Rep. Joe Courtney (Conn.), who has been a leading Democratic voice against the tax since 2009.

“There’s a lot of people like myself who voted for the law but are prepared to perform surgery to eliminate this tax,” Courtney said. “It’s not going to fall into the camp of a lot of other repeal ObamaCare measures where the two parties have just gone to their respective corners.”

The Cadillac tax split lawmakers and economists from the earliest days of work on the Affordable Care Act (ACA) and has remained a sticking point through the end.

Back in 2009, the tax was the target of an intense lobbying campaign led by the unlikely bedfellows of AFL-CIO and the U.S. Chamber of Commerce. Shortly before final passage, a group of 173 House Democrats — including Courtney — wrote to then-House Majority Leader Nancy Pelosi (D-Calif.) opposing the tax.

As a concession then, Courtney helped negotiate a five-year delay of the provision, which he described as “more of a truce.”

“It was well understood that it was going to be revisited,” he said.

Now, Courtney and others are springing into action as the 2018 starting point for the tax draws closer. Many businesses are already holding off on making changes to their employer plans in a wait-and-see approach to the tax, according to a survey from the National Business Group on Health this summer.

The Connecticut Democrat says one of the biggest problems is figuring out how to replace the revenue that would be lost if the Cadillac tax were repealed, since it’s slated to pay for much of the healthcare law. The tax was initially expected to generate about $200 billion — about one-quarter of the law’s full price tag — though the total has been revised down to about $87 billion this year, according to the Congressional Budget Office.

Meanwhile, the number of people affected by the tax has continued to rise, driven by the rising costs of premiums that are growing faster than inflation. Initially, the tax was slated to hit about 14 percent of individuals, a figure that has since been revised to one in five.

Opponents from all sides argue that the Cadillac tax deserves the same treatment that was given to other parts of the law after groundswells of complaints. They specifically point to the bill signed by Obama this month that changed the definition of a small business to help employers save money on plans.

“We did recently get an amendment to the ACA, it was a fairly big deal,” Randy Johnson, the vice president for benefits at the Chamber of Commerce, said in a briefing earlier this month. “Things can be done, it just takes time, and we’re in here for the long haul.”

For the administration, the repeal question is mostly about how to replace lost revenue. A tax on high-cost insurance plans is at the heart of its strategy to contain costs across the marketplace.

The excise tax on insurance, they argue, will prompt employers and employees to seek out and provide cheaper insurance.

“It is perhaps the single biggest leverage we have on health costs in the private sector,” Jason Furman, chairman of Obama’s Council of Economic Advisers, told The Boston Globe this month.

Obama also touted the tax’s benefits during a joint speech to Congress as he pitched his legislation in 2009: “This modest change could help hold down the cost of healthcare for all of us in the long run.”

The administration’s seemingly unbending stance has irritated Courtney, especially after he’s won support from Democratic presidential candidates Hillary Clinton and Sen. Bernie Sanders (I-Vt.), who are both courting unions on the campaign trail.

“That’s very disappointing and frustrating for us, but at some point, [the administration] can count too, and they can see that we have over a majority in the House in one form or another,” Courtney said.

Tags Bernie Sanders Hillary Clinton Jason Furman
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