Cadillac Tax – What Next?

Last week, Geoff Manville (Mercer Government Affairs) and I joined members from the Alliance to Fight the 40 for a meeting with new Treasury Department officials and career staff to discuss what now looks like impending implementation of the Cadillac Tax in 2020.

First, a word about The Alliance. It is a group of businesses, patient advocates, employer organizations, unions, local governments, health care companies, consumer groups and other stakeholders that support employer-sponsored health coverage, with leadership provided by the American Benefits Council and lobbying support from Washington Council Ernst & Young. The Alliance has been all over Washington for the past several years warning about the Cadillac Tax’s adverse consequences for business and workers and urging its repeal. Mercer has played an important role in many of these meetings, providing survey data and financial modeling to bring employer concerns and the tax’s negative effects to life for lawmakers and regulators. Check out the infographic posted on the Alliance’s website that makes the case.

Here’s what we’ve been asking for, in order of employer preference:

  • Full repeal. This would require legislative action. The Alliance has and continues to lobby actively for repeal. Unfortunately, full repeal has been largely off the table for bills written to pass under reconciliation because of budget pressure. There is bipartisan support for repeal and work is underway to make that happen.

  • Further delay. While working on repeal, a logical “Plan B” is delay. While previous repeal and replace bills in the House and Senate included a delay of the tax, the Graham-Cassidy bill up for a possible vote this week does not. 2020 is not that far away and most employers need 18 months notice to comply with complex regulations.

Our objectives for the meeting with Treasury – which now must move quickly to write implementing regulations for the tax -- were to share our POV on how complicated the tax is and what it means for business and workers. From the conversation, it was clear that Treasury officials realize the complexity of the law and the difficulties they face in crafting rules. To that end, they were greatly appreciative of previously-submitted comments from Mercer and the Alliance suggesting ways to simplify calculation and payment of the tax and for crafting a safe harbor for its cost thresholds.

It doesn’t appear that draft regulations are imminent and in fact, officials are contemplating another notice for comment. In the meantime, we will keep working to repeal, or at a minimum delay, this dreaded tax.

Tracy Watts
by Tracy Watts

Senior Partner, National Leader for U.S. Health Policy

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