NEWS RELEASE

April 28, 2015
NR 2015-9

For additional information:
Jason Hammersla
office 202-289-6700 / cell 202-422-4652

EMBARGOED UNTIL April 28, 2015, at 1 p.m. ET

Council voices support for repeal of tax on health plans

Bipartisan Middle Class Health Benefits Tax Repeal Act would help preserve employer-sponsored health coverage

WASHINGTON, DC — The 40 percent excise tax is flawed conceptually and in its construction, and must be repealed. Passage of the Middle Class Health Benefits Tax Repeal Act would prevent this tax from wreaking havoc with employer-sponsored health coverage that provides great value to American workers and families," said American Benefits Council President James A. Klein upon introduction of the bill.

"Five years after passage, opinions of the Patient Protection and Affordable Care Act (PPACA) still vary greatly. But on one matter there has always been unanimity: the law was intended to build upon employer-sponsored health coverage. So it is of real concern that one provision, the co-called 'Cadillac tax,' threatens to end employer-sponsored health coverage. Clearly, that was not Congress' intent when it passed the law," said Klein.

"Unless repealed, this 'Cadillac tax' will eventually apply to every health plan vehicle on the road, especially damaging plans with large numbers of women, older workers and families living in areas where health services are expensive," Klein said.

The term "Cadillac tax" suggests it will only hit overly-generous plans. But research estimates that in 2018, more than one-third of employer-sponsored plans will trigger the tax unless the value of those plans is significantly reduced. But the greater long-term concern is that because of the way the cost thresholds that trigger the tax are indexed, eventually even plans that only meet the minimum value required by the law will cross the thresholds," Klein added.

"Fortunately, the sponsor of the Middle Class Health Benefits Tax Repeal Act, Representative Joe Courtney (D-CT) - a strong supporter of health reform - understands the potential impact of this tax. During debate of the Affordable Care Act he had the foresight to identify the concerns with the tax and his efforts helped delay its implementation. Today he has demonstrated similar leadership," Klein said. Likewise, Representative Frank Guinta (R-NH) has also authored repeal legislation.

A separate reality about the tax, is that it will not collect the revenue it is officially estimated to raise. Of the $87 billion now expected to be raised over the next 10 years, only about one-quarter is estimated to come from excise tax receipts. The other three-quarters is estimated to come from employers lowering the value of health coverage and replacing the cost, dollar-for-dollar, with taxable wages.

"Not one employer with whom I have spoken the past five years believes it will increase wages by the amount it will be compelled to reduce health benefits," noted Klein.

"If employers are right and the Congressional budget estimators are wrong, the actual revenue collected will fall far short of what is projected. But if employers are wrong and the budget estimators are right, working men and women will see their tax burden go up as the value of their health coverage goes down," said Klein.

"We urge Congress to follow the bipartisan leaders of this effort and repeal the 40 percent excise tax before it does irreparable harm to employer-sponsored health coverage," Klein concluded.

For more information on health policy issues, or to arrange an interview with Klein or Katy Spangler, senior vice president, health policy, please contact Jason Hammersla, Council senior director of communications, at jhammersla@abcstaff.org or by phone at 202-289-6700 (office) or (202) 422-4652 (mobile).

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The American Benefits Council is the national trade association for companies concerned about federal legislation and regulations affecting all aspects of the employee benefits system. The Council's members represent the entire spectrum of the private employee benefits community and either sponsor directly or administer retirement and health plans covering more than 100 million Americans.