‘CLICK’ To Repeal Caddy Tax | Mercer US

‘CLICK’ To Repeal Caddy Tax

Our Thinking / Healthcare / ACA Cadillac Tax

‘CLICK’ To Repeal Caddy Tax
Calendar24 October 2019

When the Affordable Care Act went into effect in 2010, the biggest compliance concern for employers was the 40% excise tax on “high cost” or “Cadillac” employer-sponsored health coverage. The tax, originally scheduled to go into effect in 2018, has been delayed two times to 2022.

In multiple Mercer surveys, employers told us that they were making changes to their programs to mitigate or, if possible, avoid the tax.  This includes many employers that don’t offer especially generous plans, because plan cost is not driven solely by benefit richness – far from it!  The fact is that all plans will eventually hit the tax threshold because it is indexed at CPI-U -- which is lower than actual CPI and far lower than the current 3-5% medical trend we have been experiencing for the past five years. Let me be clear, I’m not suggesting that Congress adjust the indexing -- the tax has to go! It’s based on a flawed economic theory that assumes curtailing the tax incentive for employer-sponsored benefits will result in a reduction in benefits, leaving employees with a larger share of uncovered medical expenses, and this additional financial pressure on consumers will result in a more efficient healthcare market. As Stan Dorn says in this Health Affairs post, “it is finally time to kill this health policy zombie.”

This is the year

Mercer has been a very active member of the Alliance to Fight the 40, a multi-stakeholder group founded by the American Benefits Council to get the tax repealed.  I’m excited to report that the work of all the stakeholders has paid off.  Earlier this year, the House passed a repeal bill 419 to 6, and a similar bill in the Senate has 63 bi-partisan co-sponsors. If ever the stars were aligned to get this done, it is right now.

You can help make this happen

We need you to add your company name to a letter to the Senate urging consideration of repeal legislation before the end of the year. If you have operations in Iowa or Kentucky, please sign letters addressed to your senators and your name will also be added to the letter addressed to the full Senate.

Repeal of the Caddy tax clearly has very strong bi-partisan support. So not only is it a win for employers and the workers covered in their health plans – it is a win for America to show we can get things done in a divided congress!

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