The Building Tradesman Newspaper

Friday, January 24, 2020

Hated 'Cadillac Tax' meets its demise

By The Building Tradesman

WASHINGTON D.C. - The "Cadillac Tax" is finally dead.

Funeral services took place in Congress in December, with both the House and Senate adopting a spending bill that included repeal of the tax, which earned bipartisan hatred and was an incredibly unpopular aspect of the decade-old Affordable Care Act. President Trump signed the $1.4 trillion spending bill into law on Dec. 20.

The Cadillac Tax was a 40 percent levy on the nation's most generous employer-provided health insurance plans — a financial hit on those that cost more than $11,200 per year for an individual policy or $30,150 for family coverage. And those "Cadillac" plans almost universally included union-backed health care insurance. The tax was seen, in part, as a way to help pay for the hoped-for universal coverage of the Affordable Care Act. But the implementation of the tax, which was originally set to go into effect in 2018 and then 2022, was previously twice delayed by Congress.

"Working people won a major bipartisan victory today with permanent repeal of the “Cadillac tax," said AFL-CIO President Richard Trumka on the budget package permanently nixing the Cadillac Tax. "This ill-advised and misleadingly named tax was threatening the health care security of millions of working people - pushing employers to hollow out benefits while driving up deductibles and co-pays. It is simply wrong to penalize workers who have successfully negotiated quality insurance coverage. Universal health care will be achieved by protecting and supporting these plans, not undermining them."

The delays implementing the tax and the obvious bipartisan dislike of the tax by Congress meant employers and associations didn't plan for the transition, because they didn't think the levy would ever be implemented. But it was always lurking in the background as an way for Congress to raise revenue.

The final nail in the Cadillac Tax coffin "is great news" for employers and their health plans, said Steve Wojcik, vice president of public policy at the National Business Group on Health (NBGH).

If the tax were not repealed, he said, “it would have really taken a big center stage, because it would have been just two years away and employers need 18 to 24 months lead time to plan health benefits," he said. “Almost all if not all employers would have had to make a decision within a few short years: Are we going to pay the tax and continue to offer benefits? Are we going to slash them to try and stay under this tax?"

The repeal of the tax is not without costs. The Congressional Budget Office projects that repeal of the Cadillac Tax will cost the federal government almost $200 billion over 10 years in terms of lost revenue.

North America’s Building Trades Unions President Sean McGarvey said NABTU "appreciates the inclusion of the permanent repeal of the misguided Cadillac Tax in the year-end spending package agreed to by Congressional negotiators. Since its inception, the building trades and their allies have worked to repeal this misguided policy that would undermine the healthcare coverage of millions of hard-working Americans and their families."