Keenan Blog

House Takes First Step Toward Repeal of Obamacare “Cadillac Tax”

July 23, 2019

The House voted on July 17th to repeal the “Cadillac Tax,” which was once seen as a key component to Obamacare during its initial introduction. The tax, delayed twice and now scheduled to go into effect in 2022, was intended to allow for generous health insurance plans without sky-rocketing costs, despite the boosted health plan benefits. The tax was proposed as an important mechanism in the effort to control health care costs in the private sector.

While debates continue about the Affordable Care Act itself, the House has almost unanimously voted to repeal the tax. With a 419-6 bipartisan vote, the opposition of both parties is apparent. It has been suggested by Senator Charles E. Grassley, the chairman of the Senate Finance Committee, that the Senate may support this motion as well. The Senate’s version of the bill currently has 42 co-sponsors.

The unified stance of both parties reflects widespread dissatisfaction from unions, businesses and health insurers. The implementation of the tax would mean a 40% excise tax on employer-provided health benefits that meet certain thresholds; $11,200 for an individual and $30,100 for a family. The concern is that the tax will impact much more than the “gold-plated” plans it was designed to curb. It is designed to prompt employers to reduce benefits in an effort to avoid it. For years, many have been concerned that the Cadillac Tax will cause middle-class workers to face increased out-of-pocket expenses, barriers to health care access, and decreased health care utilization.

Despite these pitfalls, the consequences of the repeal on this tax are considerable. Estimated by the Congressional Budget Office, repealing the tax would cause an increase in federal deficits by $197 billion through 2029. Those that stand in favor of the tax argue that it is the key component to paying for the Affordable Care Act and removing the tax will inevitably worsen the federal deficit and do little stop the rising health care costs.

We will continue to follow the Senate’s companion bill, and keep you informed of developments to the Cadillac Tax repeal efforts through our briefings or updated blog posts.

About Amy Donovan
Amy is Keenan's Vice President of Legislative and Regulatory Affairs, authoring the firm's Briefings and position papers on legislation, regulation and litigation that have an impact on the firm and its clients.