Bills
| 3.23.22

Should the Obamacare “Cadillac tax” on High Cost Employer-Sponsored Health Insurance Plans be Repealed? (H.R. 173)

Do you support or oppose this bill?

What is H.R. 173?

(Updated December 4, 2021)

This bill would repeal the Affordable Care Act’s so-called “Cadillac tax” which imposes a 40 percent excise tax on high-cost employer-sponsored health insurance plans. The Cadillac tax is currently scheduled to take effect in 2020, and would apply to health plans that are valued at more than $10,200 for individuals or $27,500 for families. Premium payments made by both employers and employees plus contributions to a variety health savings / spending accounts count toward that total.

Under current law, health benefits provided by employers are excluded from their taxes, which can incentivize employers to pay a greater share of their employees’ compensation in the form of health benefits rather than in wages. The Cadillac tax essentially creates a cap on this tax exclusion by imposing a tax on high-cost health plans offered by employers. It also is not currently indexed to inflation or healthcare costs, meaning that as health insurance plans get more expensive more people will end up paying the tax.

Argument in favor

The Cadillac tax unfairly punishes businesses for offering their employees with a broad variety of health insurance plans. It should be repealed so that workers aren’t subjected to higher premiums and deductibles, because the increased cost would be passed on to them.

Argument opposed

Not only will it provide much needed tax revenue, but the Cadillac tax actually promotes greater economic efficiency by trying to reduce the use of a tax exclusion that allows employers to exclude what they pay in employee health benefits from their taxable income.

Impact

Employees who are enrolled in and employers who offer high-cost health insurance plans; and the federal government.

Cost of H.R. 173

A CBO cost estimate is unavailable.

Additional Info

In-Depth: Sponsoring Rep. Mike Kelly (R-PA) introduced this bill to repeal the Cadillac tax, which he called a “major reason why the so-called Affordable Care Act will make health care even less affordable and accessible for so many households across America,” and added:

“Sensible health care policy should encourage employers to offer a full range of health plans to their associates, not punish them with an unfair tax for doing so. The sad result will be higher deductibles and fewer services for hardworking Americans. With most Pennsylvanians covered by employer-sponsored health insurance, this Obamacare tax will be a disaster felt especially close to home.”

This bill has the bipartisan support of 11 cosponsors in the House, including seven Democrats and four Republicans.


Of Note: The Cadillac tax was originally slated to take effect in 2018, but a provision delaying it for two years was included in an omnibus spending bill that was enacted in December 2015. An analysis done by the Kaiser Family Foundation found that the tax will impact about 42 percent of American employers and their employees.


Media:

Summary by Eric Revell
(Photo Credit: Gedstrom / Creative Commons)