House to Vote on Cadillac Tax Repeal

July 17, 2019

The House is scheduled to vote Wednesday on legislation to repeal the Affordable Care Act’s (ACAs) excise tax on high-cost health plans, a priority for congressional Democrats. Introduced by Rep. Joe Courtney (D-Conn.), the repeal bill—the Middle Class Health Benefits Tax Repeal Act of 2019 (H.R. 748) — has bipartisan support in both the House and Senate.

The ACA imposed a 40 percent excise tax on the value of employer-sponsored health plans that exceeds certain high thresholds (about $11,200 for individuals and $30,100 for families in 2022). Higher dollar limits apply to retirees and workers in certain high-risk occupations, and the thresholds are adjusted for the age and gender make-up of each employer’s workforce.

Repealing the so-called Cadillac tax comes with a huge price tag –the Congressional Budget Office projected in May that rolling back the excise tax would cost $193 billion between 2019 and 2029.

The tax was originally set to take effect in 2018, but lawmakers have twice delayed it. It is now scheduled to begin in 2022. Repealing the tax would cost approximately $193 billion through 2029, but that understates its long-term cost. The cost of repeal rises rapidly in the long run, totaling as much as $1 trillion in the 2030s.

In a recent analysis, the Kaiser Family Foundation estimated that 21 percent of employers offering health benefits will have at least one plan which applies for the tax. That number jumps up to 31 percent when potential flexible spending accounts are added.

Those proportion are expected to rise year-over-year. While the definition is high cost is pegged to inflation increases, general premium increases threaten to reach the benchmark, even without major changes to plan design.

The bill will be considered under suspension of the rules, an expedited procedure that limits debate and requires a two-thirds majority vote to pass. With 359 co-sponsors, the bill is expected to easily sail through the House.

In May, Rep. Courtney asked that the measure be put on the House “consensus calendar,” which Speaker Nancy Pelosi (D-Calif.) agreed to when she sought the speakership last year. That creates a path to floor votes for bills with at least 290 co-sponsors.

If the House passes it this week, it is not clear whether the Senate would take up the bill. The Senate never took up legislation to roll back another tax levied under the health care law, a 2.3 percent excise tax on medical devices, after the House passed it last year.

NSBA has long warned against the Cadillac tax because it will punish small businesses with plans that cost more simply due to the make-up of their workforce. NSBA has long argued that the 40 percent excise tax will impact moderate benefit plans that middle class Americans rely on, as well as the employer-sponsored health insurance market. Further, including HSA, Health Reimbursement Arrangement (HRA) and health care Flexible Spending Account (FSA) contributions in the calculations is counter to the purpose of this tax. The complicated nature of calculating and paying the Cadillac Tax will further harm small employers.