Benefits and Compensation

U.S. Representative Introduces Bill to Repeal Cadillac Tax

On January 4, U.S. Representative Mike Kelly (R-PA) introduced H.R. 173, the Middle Class Health Benefits Tax Repeal Act of 2017. The bill seeks to repeal the so-called “Cadillac Tax” provision within the Affordable Care Act (ACA). The provision, which is currently slated to go into effect January 1, 2020, would impose a 40% excise tax on all employer-provided health insurance plans valued at more than $10,200 for individual coverage and $27,500 for families. H.R. 173 is cosponsored by Rep. Joe Courtney (D-CT).

ACA

“As President Obama comes to Capitol Hill to try to save his failed health care law, I am proud to take one of the first steps in repealing and replacing this law in order to save the American people from its harmful consequences,” said Kelly in a press release.

The Cadillac Tax has been widely unpopular with Democrats and Republicans alike; it has already been pushed back 2 years from its original effective date of January 1, 2018. Kelly’s press release notes that, according to analysis by the Kaiser Family Foundation, the tax will impact approximately 42% of American employers and their employees.

Unpopular though it is, the Cadillac Tax is designed to provide a significant portion of the funding for the ACA. It is unclear how this money will be recouped absent the Cadillac Tax if the ACA, or significant portions of it, survives following the transition to the Trump Administration. Coincidentally, a new report has surfaced that shows how much money it would cost if the ACA was repealed, entirely.

How Much Will It Cost to Repeal the ACA?

According to new estimates by the Committee for a Responsible Federal Budget (CFRB), a nonpartisan, nonprofit organization dedicated to educating the public on issues with significant fiscal policy impact, repealing the ACA in its entirety would cost somewhere between $150 billion and $350 billion through 2027.

This estimate takes into account the ACA’s various provisions designed to expand health care coverage, as well as offsets that raise taxes and slow the growth of Medicare spending.

In addition, the CFRB’s research concludes:

  • Repealing just the ACA’s coverage provisions would save $1.55 trillion through 2027 ($1.75 trillion on a dynamic basis).
  • Repealing the ACA’s coverage and revenue provisions would save $750 billion ($950 billion on a dynamic basis) through 2027.
  • Delaying repeal of most coverage provisions but not revenue offsets or mandates would significantly reduce potential savings. A 4-year delay would reduce savings to $300 billion ($500 billion on a dynamic basis).
  • Repealing the ACA would increase the number of uninsured people by 23 million.
  • Legislation to replace the ACA with other coverage provisions could be costly, likely requiring policymakers to retain the majority of ACA’s offsets.

For more information, refer to the CRFB’s White Paper. As always, we’ll keep you posted on any further developments regarding the ACA and its provisions.

JenJennifer Carsen, JD,is a Senior Legal Editor for BLR’s human resources and employment law publications, focusing on benefits compliance. In the past, she served as the managing editor of California Employer Resources (CER), BLR’s California-specific division, overseeing the content of CER’s print and online publications and coordinating live events and webinars for both BLR and CER.

Before joining CER in 2005, Ms. Carsen was a Legal Editor at CCH, Inc. and practiced in the Labor & Employment Department at Sidley & Austin, LLP in Chicago. She received her law degree from the New York University School of Law and her B.A. from Williams College. She is a member of the New Hampshire Bar Association.

Questions? Comments? Contact Jen at jcarsen@blr.com for more information on this topic