The $1.1 trillion budget deal that Congress approved last week would delay the unpopular Cadillac tax for two years and put a repeal in reach of the congressional leaders and business groups who oppose it.
The House voted 316-113 December 17 to approve the omnibus spending deal that congressional leaders unveiled earlier in the week. The Senate followed quickly with a 65-33 vote to approve the package and sent it to President Barack Obama, who indicated he would not veto the measure.
The repeal would delay the 40% excise tax, which would be imposed on the portion of group health plan premiums that exceed $10,200 for single coverage and $27,500 for family coverage under the Patient Protection and Affordable Care Act.
According to a recent analysis by the Kaiser Family Foundation, about 1 in 4 employers can be expected to offer health plans in 2018 that are expensive enough to be affected by the Cadillac tax. After that, the tax’s reach will expand quickly, because it is tied to the rate of inflation and insurance premiums have been growing more rapidly than that rate — meaning that more and more health plans will be ensnared as time goes on. The analysis shows that 30 percent of employers will be affected by the tax by 2023 and 42 percent five years after that, if their health plans remain unchanged and health costs continue upward at the same pace.
Unfortunately, benefits experts say delaying the excise tax until 2020 is unlikely to ease the aggressive strategies companies have put in place to avoid triggering it. Seventy-two percent of employers expect at least one of their benefit plans to hit the excise tax in 2020 if they don’t control costs, according to a survey in August. Employers saw group health plan costs rise 3.8% in 2015 to an average $11,635 per employee.
Supporters of the excise tax, however, see it as a way to slow U.S. health care spending, which the U.S. Centers for Medicare and Medicaid Services said topped $3 trillion in 2014.
According to the bipartisan nonprofit Committee for a Responsible Federal Budget, delaying the Cadillac tax until 2020 would cost the government $16 billion. Repealing it would cost $91.1 billion over the next 10 years, the committee said last week.
The congressional Joint Committee on Taxation has estimated that the tax will bring in $2.2 billion in 2018 and $7.2 billion in 2019. Its revenue would balloon after that, totaling an estimated $91 billion by 2025.
In addition to the two-year delay Congress passed Friday, the omnibus budget bill also calls for a study by the U.S. comptroller general and the National Association of Insurance Commissioners of whether the ACA uses “suitable” benchmarks to determine if the tax should be adjusted to reflect age and gender factors in setting the excise tax thresholds.
A decision by Congress to defer a new tax on expensive employer health plans would cost the government an estimated $9 billion and have a potent symbolic effect as the first major change that lawmakers have made to the Affordable Care Act since its passage.
The two-year postponement is the most significant of three changes to ACA taxes that are woven into a sprawling budget package on which the House and Senate are preparing to vote within the next few days.
The legislation would suspend temporarily both of the other taxes, which already have begun. It would lift for two years a tax on medical devices and create a one-year moratorium in 2017 on a tax levied on all private health insurance.