Congress

House passes repeal of Obamacare tax on high-cost plans

‘Cadillac tax’ never took effect under intense lobbying against it by employers and unions

“If we fail to repeal the Cadillac tax, we will leave working families with less health care coverage, higher out-of-pocket health care costs and little to no wage increases,” says Ways and Means Committee Chairman Richard E. Neal of Massachusetts. (Tom Williams/CQ Roll Call)

The House passed, 419-6, legislation Wednesday to repeal the so-called Cadillac tax, pleasing health insurers, unions and a bipartisan coalition of lawmakers who have long pushed to scrap the levy.

The measure would permanently repeal the 40 percent excise tax on high-cost employer-provided health insurance, which was envisioned as a key way to pay for the 2010 health care law. The tax, which Congress twice delayed from taking effect, is set to go into effect in 2022.

Members of both parties said on the House floor before the vote that repealing the tax would help improve affordability, since employers have shifted to high-deductible health plans to avoid the levy.

“If we fail to repeal the Cadillac tax, we will leave working families with less health care coverage, higher out-of-pocket health care costs and little to no wage increases,” said Ways and Means Committee Chairman Richard E. Neal of Massachusetts.

Republican Rep. Mike Kelly of Pennsylvania praised the move as a bipartisan way to preserve employer-sponsored health insurance.

The path in the Senate is less clear. The House passed legislation last year to repeal the health care law’s 2.3 percent tax on medical devices, but the Senate did not take it up.

Senate Finance Committee Chairman Charles E. Grassley said Tuesday he doesn’t expect the Senate to act on it this year.

“You’re talking about something coming up in 2021,” the Iowa Republican said, adding that the Senate would instead focus on more pressing issues.

The tax never took effect under intense lobbying against it by employers and unions, but economists oppose its repeal, given that it is not offset and would cost about $197 billion over a decade, according to the Congressional Budget Office.

Arguments

Steve Wojcik, vice president for public policy at the National Business Group on Health, said the repeal would remove uncertainty for employers planning future insurance coverage for their workers, a process that for large employers often spans two years.

“It’d be good to have a lot of certainty that this is no longer looming over this process for employer plans and employees,” he said. “It would add costs for both employers and employees.”

While powerful lobbying forces oppose the tax, it’s unique in its ability to unite health economists across the political spectrum, said Maya MacGuineas, president of the Committee for a Responsible Federal Budget.

Not only would repealing the tax create “a huge revenue hole,” but keeping it is also good policy to lower health care costs, she said.

“More generous insurance ... creates a higher demand for health care and a lower price sensitivity,” she said. “We’re subsidizing very generous health care plans that tend to be tilted toward the upper end of the income spectrum.”

Wojcik argued that most employer plans would be on track to trigger the tax within the next few years because the indexing is tied to overall inflation, which is rising slower than health care costs.

“This is a tax on plans and the people in them, but it doesn’t do anything to reduce health care costs and much of the health care cost increases,” he said.

Push to repeal other taxes

A vote in favor of rolling back the levy is likely to fuel a push to roll back other taxes set under the health care law, such a 2.3 percent surcharge on medical devices and a tax on health insurers, both of which are set to take effect again next year.

A House Democratic aide said Wednesday’s vote didn’t necessarily tee up future votes to roll back the health law’s taxes — but lobbyists for the medical device industry said the vote on the Cadillac tax, which is more expensive than rolling back the device tax, shows lawmakers’ openness to repeal votes. A Senate bill to roll back the tax has more co-sponsors than last year’s version.

Matt Eyles, president and CEO of America’s Health Insurance Plans, a trade group representing insurers, said in a statement that lawmakers should pass a repeal of the health insurance tax as a way to push down premiums.

The insurance tax “increases premiums by tens of billions of dollars for employer-provided and individual market coverage, and increases costs for seniors with Medicare Advantage as well as state Medicaid programs,” Eyles said. “Taking action now on both these taxes will significantly improve health care affordability for American workers, businesses, and taxpayers.”  

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