The U.S. House on Wednesday approved a bipartisan bill cosponsored by U.S. Representative Jaime Herrera Beutler to repeal the unpopular Obamacare excise tax on high-quality health insurance plans, a provision widely known as the “Cadillac tax” and which nearly led to a strike at a Longview pulp and paper mill four years ago.
The 40% excise tax is part of the Affordable Care Act and originally was supposed to take effect in 2018, but Congress has pushed back the effective date to 2022.
However, the Middle Class Health Benefits Tax Repeal Act, co-sponsored by Herrera Beutler, would eliminate the tax on high quality health insurance plans offered by small businesses, labor unions, and other employers that benefit low- and middle-income workers, the Southwest Washington Congresswoman said in a prepared statement.
“Protecting vital medical coverage and lowering health care costs for hardworking families in Southwest Washington have been two of my top priorities in Congress. That’s why I’m so proud of today’s vote to repeal the harmful ‘Cadillac tax’ – it’s a victory for every individual and family who rely on employer-provided benefits to meet their health care needs,” Herrera Beutler said in the statement.
People are also reading…
This “Cadillac tax” will equal 40% of the value of health benefits exceeding certain thresholds. These thresholds are projected to be $11,200 for single coverage and $30,150 for family coverage in 2022, according to the Tax Policy Center. The thresholds will be indexed to growth in the consumer price index in subsequent years. Thresholds will be higher for plans with more-expensive-than-average demographics, retirees ages 55 to 64, and workers in high-risk professions.
“The tax will be levied on insurance companies, but the burden will likely be passed on to workers in the form of lower wages,” according to Tax Policy Center reports.
The Cadillac Tax was the chief reason that 2015 contract negotiations between KapStone Paper and Packaging and its Longview pulp workers union were so contentious. The threat that it would have to pay the tax is why the company ultimately was able to get the union to agree to end a no-deductible Kaiser HMO plan at the Longview mill. The whole saga drove up the costs of health care for mill workers and their families.
The House bill, the Middle Class Health Benefits Tax Repeal Act of 2019, had more than 350 co-sponsors and passed easily with bipartisan support. Senate Republicans have shown interest in the bill, it’s not not certain yet whether Senate Majority Leader Mitch McConnell will bring the bill up for a vote in Senate.
The tax was meant as a way to combat overuse of medical care. Traditionally, the government doesn’t tax employer-sponsored insurance. This has created a huge incentive for companies to spend more money on generous insurance plans and less on cash wages. This, in turn, pushes up health-care costs across the system. When workers have expensive plans with no co-pays or deductibles, they’re likely to use lots of health care, including trips to the doctor they don’t really need, according to vox.com.
By its very nature, “the Cadillac tax was literally designed to encourage companies to make insurance plans worse. Not necessarily terrible — but just to reduce benefits and control costs,” Vox said.
According to Herrera Beutler’s office:
- The Kaiser Family Foundation estimates the tax would affect 21% of employers offering health benefits when it takes effect in 2022 unless employers change their health plans.
- The “Cadillac tax” would particularly impact middle-income families, who are already struggling to afford health coverage. According to census data, over half (54%) of those with private coverage – most of which is employer-provided – have household incomes of less than $100,000 and are poised to be impacted by the impending tax.
Under the Affordable Care Act, employer-sponsored health benefits whose value exceeds specified thresholds will be subject to an excise tax starting in 2022. (The Cadillac tax was originally scheduled to take effect in 2018 but has been delayed twice by legislation, most recently by the Extension of Continuing Appropriations Act of January 2018.)
The Cadillac tax will apply not only to employers’ and employees’ contributions to health insurance premiums, but also to contributions to health saving accounts, health reimbursement arrangements, and medical flexible spending accounts.
