Twelve Senate Democrats, Bernie Sanders back repeal of the Cadillac Tax. Will it survive?

The tax is scheduled to go into effect in 2018

Josh Zeitlin, Associate Editor

There's growing support in Congress to repeal the Affordable Care Act's (ACA) excise tax on high-cost employer sponsored health plans—also known as the "Cadillac Tax"—which is scheduled to take effect in 2018.

Under the ACA, employers that offer health plans with annual premiums of more than $10,200 for individuals or $27,500 for families would pay a 40% excise tax on the portion of the premiums that exceeds those thresholds. The dollar value thresholds will be adjusted annually based on the Consumer Price Index.

The Congressional Budget Office projects that the tax would bring in about $87 billion over the next decade. But as Sarah Kliff notes for Vox, the intent of the tax is less to bring in revenue and more to change employers' behavior—that is, to push them to offer health insurance with lower premiums, which could result in wage increases.

Support for repeal

But while some economists may back the tax, a coalition of labor and employer groups want it gone—and increasingly have support from lawmakers on both sides of the aisle.

On Thursday, Democratic presidential candidate Sen. Bernie Sanders (I-Vermont) and 11 other Senate Democrats introduced legislation that would repeal the tax, which is scheduled to take effect in 2018.

Another Senate Democrat, Sen. Martin Heinrich (New Mexico), is backing a separate repeal bill put forward earlier this month that also has the support of 15 Republican senators.

And on the House side, there are also two bills to repeal the tax—one that has been backed by 137 Democrats and a handful of Republicans, and another that is backed by nearly 100 Republican members of Congress.

Plus, Democratic presidential candidate Hillary Clinton is expected to come out against the Cadillac Tax, Sarah Ferris reports for The Hill.

What will happen next?

The Cadillac Tax certainly appears to be among the most likely parts of the ACA to be repealed. But there are two big impediments to that becoming reality: How to pay for it, and overcoming President Obama's veto.

How employers are preparing for the Cadillac Tax

According to Ferris, Sanders' bill is the only one so far that has included a way to replace the lost revenue for the tax—a surtax on high-income Americans, which is unlikely to be popular with GOP lawmakers.

So there are several open questions that remain: Can lawmakers coalesce around a way to pay for the tax's repeal? Would they pass a repeal without a way to pay-for it? Would President Obama veto a repeal—and could Congress have the votes to override?

Employers—including hospitals and health systems—will be looking for the answers.


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