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Will the Cadillac Tax Finally Be Repealed?

by | Aug 23, 2019 | Uncategorized |

The ACA’s excise tax on high cost health pans – known as the Cadillac Plan tax – imposes a 40% surcharge on the value of health plan benefits exceeding a statutory dollar threshold (in 2010 dollars) (subject to various adjustments and indexing over time).  The tax has been delayed several times and is now scheduled to take effect in 2022.

The U.S. House voted (419 to 6) to repeal the Cadillac Plan tax and sent the bill to the U.S. Senate late last month before Congress left for summer recess. The House bill is a straight repeal without proposing a replacement.  There is apparently strong support for repeal in the Senate, but the fate of the Cadillac Plan tax is far from certain.

Here’s the problem: repeal of the Cadillac Plan tax will cost the US Treasury $197 billion in anticipated revenue over the next ten years. Granted the Treasury hasn’t seen a penny of the Cadillac tax to date, but its repeal creates problems from a budgetary standpoint.

Here’s the next problem: various groups are pushing to replace the Cadillac Plan tax by either eliminating or curtailing the current tax exemption received by employees for employer-provided health benefits.

All eyes will be on the Senate upon its return from recess.  Will it vote for repeal or kick the can down the road a bit further; perhaps beyond the next national election in just over 12 months?