The House is poised to pass a proposed repeal of Obamacare's 40% excise tax on expensive employer plans on Wednesday, paving the way for a major win for employer groups and insurers.
For critics of the employer tax exclusion that more or less forged the U.S. insurance system, repeal of the so-called Cadillac tax would kneecap any hope to chip away at the tax break blamed for sacrificing workers' wages for health insurance benefits.
In the Senate, 42 lawmakers have signed onto the companion bill, which is titled the Middle Class Health Benefits Tax Repeal Act of 2019.
This momentum to repeal the Cadillac tax follows last year's axing of the Independent Payment Advisory Board, or IPAB. Like the Cadillac tax, IPAB never went into effect. Congress had intended those two policies to together act as the primary means to control healthcare spending through the Affordable Care Act.
House Majority Leader Steny Hoyer (D-Md.) referred to the IPAB repeal as he discussed his support for eliminating the Cadillac tax. A one-time supporter of the levy, he cited economists who have posited that the Cadillac tax isn't likely to control costs as Congress had thought when the ACA passed.
While it's unpopular with employer groups and unions alike, a cap on the exclusion was a priority of former House Speaker Paul Ryan (R-Wis.), who included it in his 2016 blueprint to undo Obamacare. In the heat of the debate to repeal and replace the ACA in 2017, Ryan called for an end to the "discrimination in the tax code against people who don't get healthcare at work."
Under pressure from employer groups and insurers, the Cadillac tax has never been implemented, but a full repeal would count as a major victory. Employer groups have energized many of the major healthcare bills Congress is working on this year, as lawmakers work on policies to address the spiking costs.
And when it comes to any potential tweaks to the ACA, repeal of the 40% excise tax is their top priority.
Steve Wojcik, vice president of public policy for the National Business Group on Health, said that since the tax is indexed to general inflation rather than ever-escalating medical inflation, even high deductible employer plans will be subject to the tax — which for his group makes the repeal all the more essential.
"The issue is that the tax would aggravate the situation (of high costs) that employers are facing, much of which they have little or no control over," Wojcik said. "Eliminating this tax makes sense, since it is a tax on healthcare costs that are going up, that employers don't have control over."
But for Marc Goldwein, senior vice president of the not-for-profit, nonpartisan policy organization Committee for a Responsible Federal Budget, repealing the tax would be a major blow to any serious effort to reform the employer health insurance system through the tax code.
He argued that even though Congress has never allowed the tax to go into effect, the moratorium still leaves the door open to find another way to cap the exclusion.
"It makes me much more pessimistic that we can attack the single-largest tax break in the code," he said.
Goldwein also disputed the idea that the tax would cripple employers who can't control healthcare costs.
"Employers will have to pay employees more in wages," he said. "Look at how private-sector insurance has grown over time. There's room for more efficient and lower-cost healthcare."
While he acknowledged some savings would come from higher deductibles and premiums, he said there are limits to those shifts and that "employers would start using their leverage again."
"An effect of the Cadillac tax is to encourage employers from offering overly generous healthcare instead of wages," Goldwein added.
With the House floor vote announced, lobbying by hopeful opponents of the tax has ramped up this week.
One coalition group called the Alliance to Fight the 40, or Don't Tax My Health Care, sent a letter to congressional leaders Monday urging their support for the repeal and citing its poll from late last week that said "86% of voters oppose taxing employer-provided health insurance."
The ERISA Industry Committee's senior vice president of health policy, James Gelfand, also wrote a letter to Congress issuing sharp warnings that the tax would shift costs to employees and effectively end employer contributions to GOP priorities like health savings accounts and flexible spending accounts. Gelfand also said employers could end up shifting everyone to high-deductible health plans and ending preferred provider organization plans.
Unions, which originally drove the creation of the employer exclusion, are also supporting repeal.