July 22, 2019

U.S. House Repeals Cadillac Tax, But Bill’s Prospects In Senate Uncertain

The U.S. House of Representatives last week passed legislation to repeal the “Cadillac tax,” a 40 percent levy that was included in the Affordable Care Act approved by Congress and signed by President Barack Obama in 2010. (The tax, when enacted, would impact plans valued at $11,200 for individual coverage and $30,100 for family coverage.)

Since 2010, the tax – which is to be implemented starting in 2020 – has generated widespread bipartisan opposition. Reflecting that united opposition, last week’s repeal was supported by 419 House lawmakers and opposed by only six.

As Connecting the Dots has reported before, while the tax was initially intended to impact only high-cost employer-sponsored health care plans, research indicates that it quickly will hit a significant percentage of employees’ plans. According to the Kaiser Family Foundation, for example, the percentage of employers with an employee health insurance plan that would reach the threshold for the tax “is projected to grow fairly rapidly over time,” to 28 percent of plans in 2025 and 37 percent in 2030 without Flexible Spending Account (FSA) benefits included and to 38 percent of plans in 2025 and 46 percent in 2030 when FSA benefits are included.

As The Wall Street Journal noted, a wide array of groups, from large multinational companies to labor unions, have worked to repeal the tax.

Repeal legislation now moves to the U.S. Senate. Leaders in that chamber have not indicated when or if the legislation will come up for a vote. The Journal reported, “The Senate bill has more than 40 co-sponsors, including Democratic presidential candidates Kamala Harris of California and Elizabeth Warren of Massachusetts,” but Senate Majority Leader Mitch McConnell (R-Ky.) “isn’t moving much legislation, focusing instead on confirming judges.”

Senate Finance Committee Chair Chuck Grassley (R-Iowa), who would have to move repeal legislation through his committee before it could be voted on by the full Senate, said he “is open to considering repeal but is focused on” passing legislation to extend expiring tax breaks first.

As a reminder, the Metals Service Center Institute and 600 other groups sent a letter to House lawmakers this past March asking them to approve legislation to repeal the tax.