Junking Cadillac Tax Still High on Employers’ Wish List


Taxing health care benefits would drive up out-of-pocket costs for employees and their families, the American Benefits Council said in a letter to the White House. 

The letter, published by the Council and 27 employer organizations on Feb. 13, asks the White House to repeal fully and permanently the Affordable Care Act’s tax on high-cost employer-sponsored health plans, known as the Cadillac Tax.

Initially set to go into effect in 2018, implementation of the pro rata 40 percent tax on plans exceeding $10,200 for individual coverage and $27,500 for family coverage was delayed until 2020 by a 2015 funding bill (Pub. L. No. 114-113).  (See related story, Cadillac Tax Isn’t Being Sent to the Junkyard Yet.)

The controversial tax is expected to generate an estimated $90 billion in revenue over 10 years.

While many of the current ACA replacement proposals would repeal the Cadillac Tax, they include a cap on the individual tax exclusion, essentially taxing a portion of employer-sponsored health plans. “We strongly urge the Trump Administration to support repealing the Cadillac Tax and maintain the current tax exclusion of employer-provided health care benefits,” the letter said.  

Legislation capping the individual tax exclusion for employer-provided health benefits would be a direct tax on both employees and employers and increase the price of health insurance for employees, the letter said.  

Opposition Bringing Politicians Together 

The bipartisan team of lawmakers responsible for delaying the tax would like to repeal it altogether.

Sens. Dean Heller (R-Nev.) and Martin Heinrich (D-N.M.) are urging their colleagues to lift the Cadillac Tax.  

Heller introduced a bill (S. 58) on Jan. 10 that would lift the tax; Heinrich is its only co-sponsor.  Rep. Mike Kelly (R-Pa.) introduced a House companion bill (H.R. 173) the same day.

See related story, Senators Revive Call to Lift Cadillac Tax.

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