By James A. Klein and Terry O’Sullivan The Affordable Care Act was passed with the intention of fixing several parts of our health care system: rising costs, growing ranks of uninsured and exclusions for pre-existing conditions. And now, a strong bipartisan group of congressional lawmakers is standing up to prevent unintended harm to employees’ health and health coverage.  

Health reform was supposed to fix what was broken, not dismantle the employer-based health system that successfully covers more than 175 million Americans. As representatives of businesses and working people, we see the 40 percent “Cadillac tax” on health benefits as a serious attack on our shared future.  

The term “Cadillac tax” falsely suggests it only affects plans with “excessive” benefits. In fact, it would hit plans that are expensive simply because they cover people with higher than average costs: women, older and disabled workers, and families experiencing catastrophic health events. That was not Congress’ intent when it passed the law.  

Democrats and Republicans do not agree about much when it comes to the Affordable Care Act. But both Secretary Hillary Rodham Clinton and House Ways and Means Committee Chairman Paul D. Ryan have called for repeal of the Cadillac tax. The reason is simple: the tax is flawed both conceptually and in its construction. The cost point that triggers the tax is based on the Consumer Price Index. But Congressional Budget Office estimates show health costs will rise more than twice as fast as general inflation over the next decade. A Towers Watson survey found that 48 percent of employers expect at least one plan could trigger the tax in 2018, when it goes into effect, and fully 82 percent just five years later.  

But by no means is this just a 2018 problem. The impact is being felt right now. Aon Hewitt reports that one-third of employers who have determined the impact of the tax are increasing out-of-pocket costs this year to avoid a trajectory that will trigger it in the future. Likewise, the CBO acknowledges employers will seek to avoid the tax by reducing benefits. Yet studies show that many patients forego needed care when faced with higher out-of-pocket costs. This is why further delay of this tax is not a solution; it must be repealed now.  

The tax also fails to account for enormous variations in health costs. A study by Milliman found that geography had a potential 69.3 percent impact on premiums — noting that a health plan costing $9,189 annually in one part of the country could cost $15,556 elsewhere. Ironically, high value plans in lower cost locations avoid the tax, while lesser value plans in higher cost areas are subjected to it.  

Analysis by Ernst & Young shockingly demonstrated that in certain high-cost states such as Georgia, Alaska, West Virginia and Wyoming, a silver-level plan in the small business exchanges will trigger the tax in 2018 or shortly thereafter. Clearly, Congress did not intend to tax plans paying 70 cents of every dollar in covered services — plans that the ACA expressly requires be offered to small employers.  

Assumptions underlying the estimated $91 billion to be generated by the tax are also concerning. The CBO projects three-quarters will come from employers replacing health benefits with taxable wages. If the CBO is correct, working Americans will be asked to pay more. If the CBO is wrong, the revenue may never materialize and employees will lose valuable benefits without a corresponding increase in pay.  

Rep.  Joe Courtney, D-Conn., has authored a bipartisan bill to repeal the tax. Along with a measure introduced by Rep. Frank C. Guinta, R-N.H., far more than a majority of House members have co-sponsored legislation to eliminate the tax. Momentum is building in the Senate, as well, as Sens. Dean Heller, R-Nev., and Martin Heinrich, D-N.M., recently introduced a companion to the Courtney bill, and Sen. Sherrod Brown, D-Ohio,  just released his repeal proposal. Both bills are joined by several cosponsors, so it is also a very bipartisan effort in the Senate.  

How to improve the health system is the subject of continued debate. In the case of the “Cadillac tax,” Congress and the Obama administration can come together now in a bipartisan fashion to do what is right for working people and businesses and repeal the tax. They should act without delay.  

James A. Klein is president of the American Benefits Council, whose member companies sponsor or administer health and retirement plans covering millions of Americans. Terry O’Sullivan is general president of the Laborers’ International Union of North America, representing a half-million members in the construction industry. Both groups are among the organizers of the Alliance to Fight the 40, a diverse coalition of public and private sector employers and labor unions.

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