Consultants say employers would try to avoid the tax by requiring workers to pay a bigger share of their medical costs out-of-pocket – essentially raising costs on their employees.
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The letter comes after Democratic presidential candidate Hillary Rodham Clinton endorsed scrapping the Cadillac tax, a position that is popular among organized labor. Sen. In a letter to key lawmakers on Capitol Hill, they wrote the “Cadillac tax will help curtail the growth of private health insurance premiums by encouraging employers to limit the costs of plans to the tax-free amount”.
The Times also reported that “those briefed on (Clinton’s) plans said she will have a method of replacing the lost revenue in the Cadillac tax through other means”. And that, the economists argue, is a problem. It will hollow out health-care plans and drive up costs because people will not get the care they need until it is too late.
For decades economists and health policy experts of all political persuasions have agreed that the unlimited exclusion of employer-financed health insurance from income and payroll taxes is economically inefficient and regressive. Under the Affordable Care Act, the so-called “Cadillac tax” goes into effect in the beginning of 2018 for both fully insured and self-funded employer health plans. A little more than one-quarter (27%) report they’ve done the calculations, and they won’t trigger the tax; in several cases it’s because they’ve already changed their plans to avoid it. Among those triggering the tax, two in five organizations (40%) are working on changes to avoid the tax, and another 40% plan to start making changes before 2018.
“Furthermore, repealing the Cadillac tax would add directly to the federal budget deficit, an estimated $91 billion over the next decade, according to the Joint Committee on Taxation”, the economists wrote.
The letter’s signers noted that they “hold widely varying views on other provisions of the Affordable Care Act, and we recognize that measures other than the Cadillac tax could have been used to restrict the open-ended health insurance tax break”.
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Portman made his comments as a bipartisan group of health and budget analysts, the Center on Budget and Policy Priorities, urged Congress to keep the tax. Repeal of the Cadillac Tax is attractive to conservatives because 1) it’s a tax and 2) it’s part of Obamacare. Unions are largely against the tax because health-care benefits are among the most valued parts of negotiated labor contracts.
