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Delay in Cadillac Tax Boosts Hopes for Repeal
By Susan Kelly
From Treasury & Risk on Wednesday, January 20, 2016
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Meanwhile, groups representing employers have been working to repeal the tax. Last year, four separate measures mandating a repeal were proposed in Congress, two in the House and two in the Senate. The move to eliminate the tax is backed by unions as well as employer groups. Brian Marcotte, president of the National Business Group on Health, which represents large companies on health policy issues, said the delay in the implementation of the Cadillac tax makes it more likely that it will be repealed. But given the Obama administration’s opposition to a repeal, he doesn’t expect to see anything this year.

“I don’t think it will happen in 2016,” said Marcotte, pictured at left. “I think we probably have to look to the 2017, 2018 window.”

In the meantime, he said, the postponement is likely to result in a pause in companies’ shift to offering high-deductible health plans as employees’ only option.
Over the past five years, more and more companies have been adopting high-deductible health plans, he said, with a big jump occurring from 2014 to 2015.

That year also saw a 50 percent increase in the portion of big companies offering the high-deductible plan as the only option, a situation that is known as “full replacement.”

“Then we saw it level off for 2016,” Marcotte said. “But we saw in the survey results that 27 percent of companies said they were considering full replacement for 2017.
“The companies that are waiting to see what’s happening with excise tax put it on hold,” he said. But he predicted that if the excise tax were to take effect, “you would see another round of companies moving to full replacement.”

“The thinking that if we could help companies lower their costs by not having such rich benefits, then they will shift that revenue to higher wages is flawed,” Marcotte said. “There’s not a one-for-one relationship between healthcare and wages, and unless you’re actually reducing your healthcare costs—not just reducing the rate of the upward trend—only then would it even be considered in the mix as to how it would affect wages.”

Meanwhile, one of companies’ criticisms of the Cadillac tax is that the thresholds don’t take into account the effects that geographic location and the age and gender of plan participants have on the cost of health insurance.

“The way it’s structured today, the thresholds are pretty arbitrary,” Marcotte said. “If I’m in the Northeast and I have an older population, even though I may have a moderate plan design, I may trigger the tax, versus a company with a younger population in the Southeast with a very rich benefit design may not trigger the tax.”