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Sept. 3 — While many are hoping for quick congressional action on the Affordable Care Act's excise tax on high-cost health plans, any changes likely wouldn't come until the midnight hour before it goes into effect in 2018, an attorney said during a webcast.
There have been a number of proposals offered to change the tax—popularly called the Cadillac tax—both in the House and the Senate that have bipartisan support, John R. Hickman, a partner in Alston & Bird LLP's Atlanta office, said Sept. 3.
Two pieces of legislation were introduced in the House earlier this year, by Rep. Frank Guinta (R-N.H.) and Rep. Joe Courtney (D-Conn.). Guinta's legislation (H.R. 879) and Courtney's bill (H.R. 2050) both would completely repeal the tax.
“Nobody likes it, but the congressional budget people say, look, if we can’t find $87 billion to fill this hole, we can’t change it, we can’t take it away. My thought is in most likelihood, we may see some changes around the edges,” he said.
Hickman predicted there would be a lot of contentious battles fought over the tax, but “in typical congressional fashion, nothing is going to happen until Dec. 31, 2017,” because “Congress trends to act when there’s a crisis.”
The political situation is also muddied by the philosophical debates going on within the Republican Party about the tax, a top U.S. Chamber of Commerce executive said at a separate event Sept. 3.
While the original aim of the Cadillac tax may have been to discourage employers from offering overly generous health plans, Hickman said it's a revenue raiser designed to pay for the ACA's premium tax subsidies.
One big issue with the tax is the way it gets adjusted for inflation, which is based on the consumer price index. The problem is that health-care costs traditionally rise much more quickly than the CPI, something Congress was most likely aware of when it wrote the statute, Hickman said.
“The reason that Congress did it this way was to stop losing tax revenue. They did it on purpose, they did it to raise funds, it will affect all employers,” he said.
Hickman cited a study released by the Kaiser Family Foundation Aug. 25 that projected up to one-quarter of health plans will be hit by the Cadillac tax in the first year.
One crucial element to the foundation's findings was that plans that offered health flexible spending accounts—which are included in calculating the cost of coverage for purposes of determining the tax—bumped up the number of plans that were projected to hit the Cadillac tax in its first year. This could result in employers dropping FSAs, as well as health savings accounts, if nothing is changed, Hickman said.
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