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Marketplace Morning Report

New Obamacare fight takes aim at ‘Cadillac’ tax

Dan Gorenstein Jul 15, 2015
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The Supreme Court fights over the Affordable Care Act may be over for now. But before you get too comfortable, there’s still plenty of fighting left to do. 

The latest example can be seen in Washington where Fortune 500 companies and labor unions have teamed up to lobby Congress to kill a tax on generous – some say lavish – health plans. In the health policy world, they call it the “Cadillac Tax,” but for employers – and employees – who may get hit by it, it’s more like a “Ford Fusion Tax.”

Most Affordable Care Act fights come from the right, but not this one says, James Klein, president of the American Benefits Council.

“There are actually more Democrats on the legislation to repeal it than there are Republicans,” he says.

Klein is leading the charge, with heavy hitters like Blue Cross Blue Shield and the labor union UNITEHERE right behind him. 

When the tax takes effect in 2018, here’s how it will be assessed: Tally up employer almost all health benefits, which includes things like premiums paid by the employer and employee as well as health savings account employer contributions and wellness plan. If that costs more than $10,200 for a person or $27,500 for a family, you’re subject to the tax.

“It’s really going to be a burden on our teachers, our custodians, the special ed aides and bus drivers,” says Brian Marshall, the superintendent of La Mesa-Spring Valley School District outside San Diego. “That’s just an attack on our middle class families.”

But the Center on Budget and Policies Priorities estimates that no more than 15 percent of plans would be hit by the tax.

“To oppose this tax by arguing that the biggest victims of the tax are ordinary middle-income workers is just not right,” says Howard Gleckman, senior fellow at the Urban Brookings Tax Policy Center. “It’s just not supported by the evidence.”

Gleckman says the tax was included in Obamacare to force insurers, providers and even consumers (which includes employers) to root out excess, a serious problem.

“Doctors who like to do more tests and procedures because they get paid more for it. And consumers who don’t care because insurance is paying for it,” he says.

Gleckman says even with business and union forces pushing repeal, there’s a big force driving the Cadillac tax: In it’s first 10 years, it’s expected to raise $90 billion to fund the ACA. 

Editor’s note: The copy in this story was updated to provide more detail about how the value of a worker’s health benefits will be tallied.