Congress considers repeal of ‘Cadillac tax’

NACo policy opposes the taxation of health insurance and supports all legislative efforts to repeal the Cadillac tax 

Two bipartisan bills have been introduced to repeal the tax on employer-sponsored health coverage, commonly referred to as the “cadillac tax.”

 In the House, Reps. Mike Kelly (R-Pa.) and Joe Courtney (D-Conn.) introduced the Middle Class Health Benefits Tax Repeal Act of 2017 (H.R. 173). It currently has 80 co-sponsors.

In the Senate, Sens. Dean Heller (R-Nev.) and Martin Heinrich (D-N.M.) introduced similar legislation, S. 58, which shares the same name as its House companion. S. 58 currently has one Democratic cosponsor and one Republican co-sponsor.

When the ACA was enacted in March 2010, one of the provisions included in the law was an excise tax on employer-sponsored health coverage, referred to as the “Cadillac tax,” which would impose a 40 percent tax on employer-sponsored health care coverage that exceeds thresholds established in the law ($10,800 for individual coverage and $29,100 for family coverage).

The Cadillac tax could  negatively impact counties by forcing them to raise insurance deductibles or significantly reduce health care benefits.

Although NACo was successful in working with Congress to delay the tax for two years, it is still set to take effect in 2020. In addition to the delay, the measure included a provision to make the excise tax deductible for employers.

Further, during the 114th Congress, 311 members of the House and 39 senators co-sponsored ultimately unsuccessful legislation to repeal the excise tax.

Counties employ over 3.6 million employees who serve more than 308 million residents and are generally not able to compete with private sector wages and salaries. Health care coverage is often the primary benefit used to attract and maintain a quality workforce.

Even though the excise tax does not take effect until 2020, given the limited capacity to raise revenue, county governments must begin preparing to change their plans to avoid hitting the tax now.

NACo policy opposes the taxation of health insurance and supports all legislative efforts to repeal the Cadillac tax on employer-sponsored health coverage.

NACo and partners have engaged in intense advocacy efforts through the Alliance to Fight the 40, a broad-based coalition comprising public and private sector employer organizations, unions, health care companies, businesses and other stakeholders that support repealing the Cadillac tax.

Through meetings with congressional staff, NACo has renewed its efforts to repeal the Cadillac tax as Congress considers health care reforms.

NACo encourages its members to contact their representatives and senators about becoming a co-sponsor of either H.R. 173 or S. 58 to protect health benefits for their dedicated county employees.

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For more information, please contact Brian Bowden at bbowden@naco.org or 202.942.4275