Congress Passes 2-Year Cadillac Tax Delay, Repeal Possible

December 22, 2015 - Congress has passed a two-year delay of the Cadillac Tax – a 40% non-deductible tax on the cost of employer-sponsored health coverage that surpasses specific benefit thresholds, part of the Omnibus spending package.

Congress passed the delay with a vote of 65 to 33. The House of Representatives approved the spending package by a 316 to 113 vote.

The next step is possible signature from President Barack Obama.

Earlier this month, the Senate voted 90-10 to repeal the Cadillac Tax with both Democrats and Republicans reportedly in favor.

Support for Cadillac Tax delay pours in

A variety of organizations loudly applaud last Friday’s Congressional activity, according to a December 18 press release from the Alliance to Fight the 40.

“The delay provides a much-needed down payment toward the ultimate goal of full repeal,” stated James A. Klein, President of the American Benefits Council.

“The breadth of concern about the tax is evidenced in the composition of our growing coalition – patient advocates, private sector and public sector employers, unions and non-profit groups. We are united in support of defending the health coverage that protects over 175 million Americans.”

“Congress has done the right thing to delay a 40 percent tax that would make employer-sponsored health insurance more difficult for workers to afford and threaten patient access to potentially lifesaving care,” asserted Chris Hansen, President of the American Cancer Society Cancer Action Network.

“The cost of medical care is what truly drives health insurance premiums and the [tax] does very little to rein in healthcare costs. For many small employers, health insurance is more expensive than ever,” said Janet Trautwein, CEO of the National Association of Health Underwriters.

“Delaying and hopefully repealing the Cadillac tax will make health insurance more affordable, and encourage more employers to retain coverage for their workers.”

“We are pleased that Congress has taken a solid first step to protect the wages and benefits of millions of hard working Americans,” stated D. Taylor, President of UNITEHERE. “Our union is proud to engage this fight and will continue to do so.”

“Consistent analysis has shown that the ‘Cadillac Tax’ disproportionately harms dependent coverage for children, and we’re pleased to see there was broad, bipartisan support in Congress to delay the tax,” said Bruce Lesley, President of First Focus, a national children’s advocacy organization. “This is a win for families.”

“This provision is a step in the right direction toward a full repeal, and will be important to help small businesses like those NTCA represents attract and retain qualified employees in rural America,” said Shirley Bloomfield, CEO of NTCA – The Rural Broadband Association.

"We commend our partners on Capitol Hill for recognizing that counties must continue to offer competitive health benefits to attract and retain quality employees," said Sallie Clark, National Association of Counties President.

"A two-year delay is a good start, and we will work toward a full repeal because the excise tax on employer-sponsored health coverage would have significant impacts on county budgets and taxpayers."

Considering the flipside with impending administrative burdens

“If the House accepts and President Obama signs the bill, it would begin to unravel the destructive coverage provisions of the law — the parts of the law that the public is acutely aware of, but not the hidden parts of the law that are causing extensive damage to personal control over health care decisions and the trusted and confidential patient-doctor relationship,” asserted Twila Brase, President of the Citizens’ Council for Health Freedom.

Any legislation that repeals the Cadillac Tax will burden the next administration, explained Adam C. Solander, member at Epstein Becker Green, to RevCycleIntelligence.com earlier this month.

“The Cadillac Tax will totally reshape how benefits are offered to employees. This is largely because of the way the Cadillac Tax thresholds are indexed for inflation,” he stated.

“The thresholds that trigger the tax are indexed based on the Consumer Price Index (CPI-U) and not medical inflation.”

“Because medical inflation far outpaces the CPI-U, the amount employers spend on healthcare will rise faster than the thresholds, eventually affecting every employer plan.”

“As a result, employers need to find strategies to bend the cost curve and stay under the thresholds while still providing a meaningful benefit to their employees.”

Editor's note: Following this article's publication, the House passed a bill to repeal President Barack Obama's Affordable Care Act.