‘Cadillac Tax’ Delayed to 2022
A two-year delay of the 40 percent “Cadillac Tax” on employer-sponsored health coverage is part of the resolution that Congress passed to end the federal government “shutdown” in January 2018.
The Cadillac Tax is a 40 percent tax on the value of employer-sponsored health coverage that exceeds certain benefit thresholds. Enacted as part of the Affordable Care Act (ACA), the tax was originally slated to go into effect in 2018 before being moved back until 2020. Congress’ latest action means the tax will be delayed to 2022.
The American Benefits Council has pledged to continue to work for full repeal of the Cadillac Tax. The Alliance belongs to the American Benefits Council on behalf of its member employers.
The measure also includes a two-year delay of the ACA tax on medical devices, a one-year delay (for 2019 only) of the ACA health insurer fee and reauthorization of the Children’s Health Insurance Program (CHIP) for six years, according to the American Benefits Council.
Contact Congress Now to Urge ‘Cadillac Tax’ Repeal
Employers are encouraged to contact their Members of Congress to urge them to repeal the 40 percent “Cadillac Tax” on employer-sponsored health coverage.
It’s important for employers to make contact now because lawmakers in the U.S. Senate and House of Representatives are negotiating early drafts of budget and tax reform legislation.
According to the American Benefits Council, these drafts have not addressed the Cadillac Tax because some lawmakers feel the 2020 effective date for the Cadillac Tax makes further delay or repeal at this time less urgent. However, The Council is working to inform lawmakers that most employers make benefits decisions 18 to 24 months in advance, so the threat of the tax is already having an impact. The Alliance is a member of the American Benefits Council on behalf of employers who belong to the cooperative.
The American Benefits Council has created talking points that employers can use when contacting elected officials to discuss the tax treatment of health benefits, including the Cadillac Tax. Employers are encouraged to personalize messages by referencing the implications for you, your company, your fellow employees or your clients.
The Council has also created a pre-written email for individuals to use when contacting elected officials urging the repeal or delay of the Cadillac Tax.
The Council encourages employers to focus their efforts by:
- Contacting House Ways and Means Committee members (particularly in Republican offices), leadership staff and Cadillac Tax champions to ask them to include repeal or (at a minimum) further delay of the Cadillac Tax in any moving legislative vehicle.
- Contacting Republican Senators to ask them to urge GOP leadership and Senate Finance Committee members to include Cadillac Tax repeal/delay in any moving vehicle. Republican senators in the Alliance service area include Senator Ron Johnson from Wisconsin and Senators Chuck Grassley and Joni Ernst from Iowa.
- Reaching out to your elected representatives as well as those with whom your company has a relationship.
Please notify the American Benefits Council if your senior executive leadership would be interested in making a visit to visiting Capitol Hill – which The Council could help arrange– to reiterate these messages.
If you need more information about contacting members of Congress or making a visit, contact The Council’s Diann Howland, vice president, legislative affairs, at 202.289.6700.
The Affordable Care Act requires that the 40 percent excise tax, also known as the Cadillac Tax, be imposed on employer-sponsored coverage that exceeds certain thresholds. Those thresholds are set at $10,800 for self-only coverage and $29,100 for family coverage when the tax takes effect in 2020. Over time, the tax is expected to impact the health plans of employers of all sizes and all types.
The Alliance to Fight the 40 works to oppose the excise tax as well as a proposed cap on the tax exclusion on employer-provided health care benefits. The Alliance to Fight the 40 is a broad-based coalition of businesses, patient advocates, employer organizations, unions, local governments, health care companies, consumer groups and other stakeholders that support employer-sponsored health coverage. The Alliance cooperative supports the work of the Fight the 40 group.
“More than 178 million Americans depend on employer-provided health insurance,” according to the Fight the 40 Group. “The only way for employers to escape the looming Cadillac Tax is to reduce coverage and shift additional costs on to workers.
“Although slated to hit in 2020, employers are making benefit design decisions today for 2020 benefits. Only full repeal can give employers the certainty they need to continue to provide more than half of all Americans with stable, efficient, effective and affordable health coverage.”
How will the tax impact employers?
• Employers must keep their health plan cost increases at low levels, or they will exceed the thresholds and be subject to the 40 percent tax.
• Premiums are expected to rise faster than the rate of inflation. This means that all employers will eventually be affected by the tax.
Pay More, Get Less: What the “Cadillac Tax” Really Means for Workers
Fight the 40 Update, September 2017
Read The Alliance to Fight the 40’s September 2017 statement on Congressional efforts to reform the tax code:
“The Alliance to Fight the 40 remains committed to repealing the Affordable Care Act’s 40% tax on health benefits—the misnamed “Cadillac Tax.”
“As Congress shifts its focus from health care reform to tax reform, the Alliance will continue advocating to repeal the ‘Cadillac Tax.’ If Congress is committed to tax reforms that reduce the tax burden on middle class Americans, Congress should prioritize repealing the 40 percent ‘Cadillac Tax’ on the health benefits of working Americans.
“More than 178 million Americans depend on health insurance coverage from their employers and the looming ‘Cadillac Tax’ is already driving up their health care costs. Working families can’t afford higher out-of-pocket costs and skimpier health coverage.
“We applaud Congress and the Administration for not including a cap on the employee exclusion for employer-sponsored coverage. Americans will reject any new efforts to tax their health care benefits received through an employer.
“Repealing the ‘Cadillac Tax’ has bicameral, bipartisan support. If Congress wants to help middle-class Americans, Congress should immediately and permanently repeal the ‘Cadillac Tax’ in tax reform and prevent any new taxes on employer-sponsored health insurance.”
What We’ve Done
The Alliance continues to share information and materials with members to support the work done by Fight the 40.
The Alliance joined the American Benefits Council and 31 other organizations in December 2016 in sending a letter supporting permanent repeal of the Cadillac Tax but opposing a cap on the tax exclusion on employer-provided health care benefits.
The Alliance also sent a letter to the IRS on the excise tax in May 2015.
What You Can Do
Here’s a sample letter drafted by The Alliance to Fight the 40. Use this template to send an email or fill out the contact form on your Senator or Representative’s website.
Dear [Senator OR Representative]:
I am writing to let you know of the negative consequences that the 40% tax (also called the “Cadillac tax”) on health benefits will have on both the employers that provide health coverage as well as their employees.
The Affordable Care Act imposes a 40% nondeductible excise tax on the value of employer-sponsored health coverage that exceeds certain benefit thresholds – initially, $10,200 for self-only coverage and $27,500 for family coverage beginning in 2018.
This tax is threatening the employer-sponsored health care system and the health care coverage of over 150 million Americans across the United States.
While this tax was alleged to be levied on only a small number of plans, current projections, as well as our actual experience with health care costs, show that this 40% tax will affect the health plans of all types of employers and a wide range of workers, including low- and moderate-income families, retirees, as well as the self-employed.
The 40% tax, which is complicated and expensive to calculate and administer, is a broad-based tax on health benefits that applies not only to insurance premiums but also to tools that employers use to contain health care costs, such as Health Savings Accounts and Flexible Spending Arrangements, on-site wellness clinics, certain wellness plans and other pre-tax health benefits.
We urge you to take quick action to prevent this tax from negatively impacting our employees and the employer-based health care of millions of workers.