Democrats' Health Platform Calls for Cadillac Tax Repeal

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By Nathaniel Weixel

July 26 — Democrats are calling for a repeal of the Affordable Care Act's tax on high-cost health plans, according to the final version of the party's platform.

“We will repeal the excise tax on high-cost health insurance and find revenue to offset it because we need to contain the long-term growth of health care costs,” the platform states. The language echoes longstanding, bipartisan concerns with the ACA's excise tax on employment-based plans with relatively high premiums.

The platform language codifies Democratic nominee Hillary Clinton's calls to repeal the 40 percent excise tax on health plans that exceed a certain value threshold. Despite the political will, the cost of a full repeal may prove to be the biggest barrier. Clinton could certainly try to repeal it, but it would likely be cheaper and politically easier to keep delaying the tax, as lawmakers already have done.

“Too many Americans are struggling to meet the cost of rising deductibles and drug prices,” Clinton said in a 2015 statement. “That’s why, among other steps, I encourage Congress to repeal the so-called Cadillac tax.”

She proposed some offsets, including limiting tax deductions for prescription drug companies. The platform, which is intended as only a broad policy wish list, includes no offset details.

The Cadillac tax was key in financing the ACA's insurance coverage expansions, and was intended to slow the rise of health-care costs by putting pressure on employers to limit their benefits and push for lower prices from hospitals and doctors. However, the tax has garnered opposition from groups across the political spectrum, including large employers, labor unions and insurers.

The fact that opposition to the tax crosses political lines makes it more likely Clinton will try something to delay or repeal the tax.

“Labor unions, the [U.S.] Chamber of Commerce, don't like this,” Bloomberg Intelligence analyst Brian Rye said in a July 25 interview. “They're strange bedfellows. That increases the chances this never gets implemented.”

Tax Has Been Delayed

According to Rye, any repeal of the tax would have to be included as part of a broader package of tax reforms. Democrats would likely not agree with the policies put forward by Republicans, so they'd be better served by continuing to delay the tax. Delays would also be cheaper: The most recent figures from the Congressional Budget Office estimated a 10-year cost of almost $90 billion.

Implementation of the tax has already been pushed back to 2020. The Obama administration has opposed delaying the Cadillac tax, but signed the delay into law because it was part of a massive year-end spending package (H.R. 2029) that funded the government through 2016 (244 HCDR, 12/21/15).

Under the ACA, health plans pay a 40 percent excise tax on the cost of their coverage over a threshold value, currently $10,200 for individuals or $27,500 for families. Those limits are expected to adjust upward before the tax takes effect in 2020. President Barack Obama has proposed ways to reduce the impact of the unpopular tax, but the big businesses and unions that opposed the tax from the start haven't been convinced.

Rye said there's strong Democratic support for the ACA's underlying goals, but some congressional Democrats have feared that supporting repeal or delay of the tax would be seen as opposing the ACA. However, once Obama leaves office, their opposition will likely fade, and they'll be willing to support alterations to the law— including repeal of the tax.

To contact the reporter on this story: Nathaniel Weixel in Washington at nweixel@bna.com

To contact the editor responsible for this story: Brian Broderick at bbroderick@bna.com

For More Information

The final platform is at https://www.demconvention.com/wp-content/uploads/2016/07/Democratic-Party-Platform-7.21.16-no-lines.pdf. The language on repealing the tax is on page 35.

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