The ‘Cadillac tax’ and the GOP Strategies

12347870_801676139962047_700891597670520719_nAs we all recover from the horrible scenes thrust into our media devices showing atrocities that we never thought were believable we need to look at what else has transpired this last week. Shootings, bombing, terrorists, and Democrats and Republicans arguing about the solutions most of which are fancied. We have no real solutions to the real problems of the world and the leaders of our country want to “give” billions of dollars to a climate change agreement in which the other countries involved have required that the U.S. to bear the major cost and leadership even though we have the most aggressive climate climate change strategies than almost any other country.
With all these problems the GOP is still trying to repeal the Affordable Care Act/Obamacare. Just look at what transpired this past week. Consider that the Senate Republicans say that they are optimistic they will soon get the necessary support to pass a reconciliation bill repealing bits of the ACA healthcare law, and send it to President Obama’s desk.
The move would be symbolic given Obama would veto the bill.
However, it would allow Republicans to say Congress overturned Obamacare, without having to face any real consequences from constituents who would lose their coverage if the bill were actually signed into law. Senate Republicans are pulling in more support by making the bill more aggressive to appeal to conservatives who said the version passed by the House didn’t go far enough. How do they propose to do this now? The repeal of the Affordable Care Act Cadillac Tax!
What is this and why are they concentrating on it?
Scheduled to take effect in 2018, the “Cadillac Tax” is a 40% non-deductible excise tax on employer-sponsored health coverage that provides high-cost benefits. The term gained popularity in the early 1990s during the debate over the Clinton health care plan of 1993,and was also widespread during debate over possible excise taxes on “Cadillac” plans during the health care reforms proposed during the Obama administration. The Patient Protection and Affordable Care Act (PPACA, as amended by the Health Care and Education Reconciliation Act of 2010), imposes an annual 40% excise tax on plans with annual premiums exceeding $10,200 for individuals or $27,500 for a family starting in 2018, to be paid by insurers. The tax is not imposed on the total cost of the plan, but on the costs exceeding the aforementioned values, which, after 2018, will adjust to inflation annually. These costs include any part of a person’s income allocated to flexible spending accounts, health reimbursement accounts, and health savings accounts, but not expenditures for stand-alone dental, vision, accident, disability, or long-term care insurance coverage. The tax is not a deductible business expense and so plan administrators pay income tax on the excise tax, significantly increasing the effect of the 40% tax. The tax is intended to do three things: help finance the PPACA/Obamacare; reduce overall health care costs; and address the unequal tax benefit of excluding employer-based health insurance coverage from taxes.
Although the tax plan was positioned to combat a “luxury”, it is not indexed for the increasing costs of care. This means as healthcare costs rise, more employees’ plans will be subjected to the tax. It also will impact, possibly eliminate, some healthcare savings accounts which are included in the plan cost calculation. A study from the nonpartisan Kaiser Family Foundation estimated 26 percent of all employers would face the tax in at least one of their plans in 2018 when the taxes are first implemented. Labor union have also opposed this tax because it would be “very disruptive” to their generous healthcare plans and have asked that their members to be eligible for the same federal subsidies available to low-income workers in the new health exchanges.
And the push in this year, 2015, is a bipartisan effort in Congress to repeal the 40% tax–H.R. 2050 introduced by Rep. Joe Courtney (D-CT) and H.R. 879 introduced by Rep. Frank Guinta (R-NH). In addition, the Alliance to Fight the 40, a broad based coalition of public and private sector employer organizations, unions, health care companies, businesses, and other stakeholders that support employer-sponsored health coverage, has been working to repeal the 40% tax.
In the Mercer’s survey, employers generally predicted that, in 2016, health benefits cost per employee will rise by 4.3% on average, an increase that reflects cost reduction changes. With no changes to their current plans, they estimate that cost would rise by an average of 6.3%. About half of all employers indicated that they would make changes in 2016.
“Employers are moving on several fronts to hold down health cost growth,” said Julio A. Portalatin, president and CEO of Mercer. “In the best scenarios, they’re addressing workforce health, restructuring provider reimbursement to reward value, and putting the consumer front and center by providing more options and more support. In other cases, the pressure to avoid the excise tax is leading to some cost-shifting, plain and simple.”
Some good news: early in the health reform debate, many small employers thought it was likely that they would drop their plans and send employees to the public exchange. But while 21% of employers with 50-499 employees in 2013 said they were likely to drop their plans within the next five years, the number fell to 15% in 2014 and to just 7% this year.
“Employers know that health benefits really influence how employees feel about where they work,” said Beth Umland, Mercer’s director of research for health and benefits. “They want to continue to offer coverage, and with cost growth holding below 4% they’re gaining confidence that they’ll be able to afford it.”

On Thursday, the Senate voted 90-10 to include an amendment to repeal the
Affordable Care Act’s (ACA) “Cadillac tax” within an omnibus spending bill.
The White House has already stated it will veto the bill if Congress approves the package. The important thing is that the vote shows there is veto-proof bipartisan support in the Senate for repealing the Cadillac tax.
While the move is more symbolic as the Obama administration has stated it will veto the measure, it is significant as the vote shows major bipartisan support for repealing the controversial tax. From Democrats to Republicans to employers, it seems the main advocates for the tax are 101 economists.
Repealing the tax would remove nearly $90 billion from the ACA over a decade, according to The Hill, adding the future is unclear to what, if any, middle ground can be reached between the White House and the many, many Cadillac tax opponents.
The question that I continue to raise is what are the alternatives to the Affordable Care Act? Just trying to repeal the ACA does nothing, especially during a time when the voters are deciding who will run our country for the next 4 years. The GOP looks already like clowns in certain venues as they argue but offer no real solutions. Also, why oh why would they go ahead with a bill to repeal the ACA through this latest strategy when the President has already stated that he will veto?? Remember that he considers the ACA his legacy.
It was also interesting during the past Thanksgiving short vacation that my kids asked me to teach them about the Health Savings Accounts and if they would be helpful. They were confused but after a teaching session realized the usefulness in this day of higher premiums and high deductibles. So, if these educated kids couldn’t understand the value and how to start and maintain them, how would the average “stupid” Americans understand and start these useful accounts? And still some of the candidates use the Health Savings Accounts as their alternatives to the ACA. Unbelievable!!!!
I grew up in a family that always voted Republican but decided when my wife and I had children that we would be Independents to allow our kids to see both sides of the “aisle” and not be biased when making those important decisions- the votes. It has become so evident that the 2 parties do not seem to know how to work together.
Is the grass greener on the other side of the fence???
I will go on to look at the health care systems on the other side of the fence.

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