Omnibus spending bill asks for delay of 'Cadillac Tax' on expensive ACA plans until '20

The tax seeks to keep health care costs down by penalizing employers who offer high-priced "Cadillac" plans.
By Doug G. Ware  |  Dec. 16, 2015 at 6:47 PM
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WASHINGTON, Dec. 16 (UPI) -- By unveiling its omnibus spending bill Wednesday, the U.S. Congress simultaneously took a step toward the first major change to President Barack Obama's signature health care law to date by postponing for two years the implementation of its so-called "Cadillac Tax" -- a penalty intended to control health care costs -- until 2020.

The highly-debated excise tax, presently set to take effect in 2018, will force employers to pay a steep 40 percent tax for expensive health plans that exceed certain cost thresholds. The objective of the tax is to cap health care costs by penalizing employers who offer expensive plans, called "Cadillac" plans.

However, Republican and Democratic lawmakers have publicly opposed the tax, including normally staunch Obama supporters Rep. Nancy Pelosi, D-Calif., and Sen. Harry Reid, D-Nev. -- the party's two most powerful members of Congress.

The main argument against the tax is that instead of mitigating the costs of health care, it will likely prompt employers to scale back or eliminate benefits altogether to offset the added cost -- a move that some analysts say may actually lead to the higher costs the tax seeks to prevent.

Many lawmakers, including Reid and Pelosi, have unsuccessfully attempted to repeal the tax for months. Wednesday's unveiling of the omnibus bill, containing the delay, stops short of accomplishing that effort but it gives opponents in Congress two extra years to fight it.

Until the omnibus is formally passed, which might happen by the end of the week, the tax will kick in when health premiums exceed $27,500 per family and $10,200 for an individual, beginning in 2018. The average current cost per premium is $17,545 for families and $6,251 for individuals.

If the omnibus bill is passed, the provision will mark the first major change to the ACA since it became law five years ago.

While Republicans and many Democrats are united in their opposition to the tax, they are doing so for different reasons.

Republicans want to kill the tax as part of their overall opposition to Obama's health care law and preference for low taxes across the board. The Democrats who want to kill it are siding with major labor unions who fear the tax will downgrade the health care benefits of their members.

The fight has intensified in the last several weeks and figures to play a major role in the 2016 elections.

"These are significant wins for Republicans," a senior GOP congressional aide told POLITICO Wednesday.

"It was one of the few things we could do for labor right now ahead of 2016," a senior Democratic Senate staffer added.

White House spokesman Josh Earnest, though, said this week that the Obama administration opposes any repeal. He did not comment on Wednesday's proposal for a delay.

While support for the "Cadillac Tax" has dwindled, there are still many among Congress and analysts who believe Wednesday's proposed delay is a move in the wrong direction.

"It was a positive step forward for addressing [employer sponsored insurance] exclusion and offered an opportunity for better reform," Brian Blase, a research analyst at George Mason University, argued in Forbes Wednesday. "In September, Kaiser Family Foundation reported that 13 percent of firms with more than 200 workers made changes to their employees' coverage or cost sharing and 8 percent of firms switched to a lower cost plan to avoid reaching the Cadillac tax thresholds.

"The Cadillac tax treatment in the Omnibus legislation contains almost the worst possible outcome."

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