- More than 1,000 employers wrote to Senate leadership Thursday pleading for it to take up legislation to repeal a controversial excise tax on high-cost employer-based health plans slated to go into effect in 2022.
- The groups, which run the gamut from payer lobby America's Health Insurance Plans to the U.S. Chamber of Commerce, argue the tax will have sweeping effects beyond just "gold-plated" health coverage and raise premiums and out-of-pocket costs for the almost 180 million Americans covered through their employer.
- The so-called Cadillac tax was originally slated to start in 2018 but has been delayed twice through bipartisan votes.
The Cadillac tax, meant to level the playing field between those purchasing coverage on the Affordable Care Act exchanges and those getting employer-sponsored plans, would produce $183 billion in federal revenue through 2029, according to the Congressional Budget Office — $96 billion directly from employers.
The House overwhelmingly passed a bill repealing the tax in July by a bipartisan vote of 419-6. The legislation is currently awaiting action in the Senate, where a third of senators are now co-sponsoring a comparison bill to repeal.
If enacted, the Cadillac tax only dings the most generous employer-provided health plans — those that cost more than $11,200 per year for an individual or $30,150 for a family.
But the looming threat of the tax caused employers to increase deductibles and other out-of-pocket cost sharing, according to the National Business Group on Health. That will likely only accelerate once the tax goes into effect, Stan Dorn, a senior fellow at patient advocacy group Families USA, wrote in Health Affairs earlier this year.
And, though the tax was intended only to hit the most generous plans, "the reality is that very modest plans covered low- and moderate-income working families are projected to trigger the tax simply because they incur greater health expenses," the 1,089 employers, unions and healthcare organizations wrote to Senate Majority Leader Mitch McConnell, R-Ky., and Minority Leader Chuck Schumer, D-NY.
Other high-profile signees include CVS Health and Cigna; pharmaceutical giants Eli Lilly and Pfizer; vehicle manufacturers General Motors, Ford, Hyundai and Toyota; and tech companies Intel and AT&T, along with Families USA.
At the same time, economists argue the levy raises needed funds for the government and would help mitigate the growth of private health insurance plan premiums by incentivizing employers to limit the costs of their plans to the tax-free amount.
"The excise tax will discourage the provision of insurance that covers such a large proportion of health care spending that consumers have little incentive to insist on cost-effective care and providers have little incentive to provide it," more than 100 high-profile economists, including Henry Aaron and Paul Ginsburg of the Brookings Institution, wrote to Congress in July. "As employers redesign health insurance plans to hold costs within the tax-free amount, cash wages or other fringe benefits will increase."
U.S. spending on healthcare rose almost 5% last year to a staggering $3.6 trillion — a growth rate largely influenced by the restoration of another tax under the ACA: the health insurance tax.
That tax, which will raise an estimated $140 billion over a decade, was imposed on all payers starting in 2014. Proponents of the HIT say it will raise funds to help offset higher costs as more people gain coverage through Medicaid expansion and premium subsidies under President Barack Obama's sweeping healthcare law.
Following intense lobbying from employers and payers, however, lawmakers suspended that law until last year. Payers continue to advocate for another delay on the tax, this time for 2020, or a full repeal.