Cadillac tax is sticking point for Congress

ObamaCare’s “Cadillac tax” has emerged as a sticking point in bipartisan negotiations over delaying certain health-care taxes before the end of the year.

Democrats are pushing to delay the “Cadillac tax” on high-cost health plans, which is despised by unions, but Republicans are pushing back and have resisted including the Cadillac tax in the package, sources say.

That dispute has created an obstacle in talks around delaying a group of ObamaCare taxes from taking effect, likely as an attachment to a large year-end spending package later this month. Two other health taxes, on medical devices and health insurance, have more bipartisan opposition, but their delay is caught up in the debate over the Cadillac tax.

{mosads}The Cadillac tax, a 40 percent levy on especially-generous health plans, was intended to bring down health-care costs and raise money to pay for the health law, but it has drawn fire from unions and businesses who say it is a costly penalty on their health coverage.

Republicans proposed delaying just the medical device tax and the health insurance tax, but Democrats shot back that they need to include a two-year Cadillac tax delay in the package as well, leading to something of an impasse for now, sources following the negotiations say.

Democrats have not made a vocal public push for delaying the Cadillac tax, and instead are focused on opposing the Republican tax-reform bill and other year-end priorities. But there is still activity behind the scenes.

Asked if Democrats are pushing to delay the Cadillac tax, Rep. Sandy Levin (D-Mich.), a senior member of the Ways and Means Committee, said “the answer is yes.” But he added “we’re not optimistic,” given Republican opposition.

Some Democrats and business lobbyists following the talks think that Republicans are resisting delaying the Cadillac tax now because they are saving it for a push next year to limit the exclusion of employer-sponsored health insurance from taxation. Keeping the threat of the Cadillac tax hanging into next year, the theory goes, could help Republicans gain leverage for enacting the similar but alternative policy of limiting the tax-exempt nature of health insurance offered through employers.

“We’re hearing that [delaying the Cadillac tax] is on the table,” said Rep. Joe Courtney (D-Conn.), a leading opponent of the tax. Referring to Rep. Richard Neal (D-Mass.), the top Democrat on the Ways and Means Committee, Courtney said, “Mr. Neal is including that on the table.”

But he noted that Republican leaders might not go along. “There’s other rumors that the leadership wants to hold on to it because they have other ideas about the exemption [for employer-sponsored coverage],” Courtney said.  

Asked about the Democratic push to delay the Cadillac tax, and whether he is saving the tax for next year, House Ways and Means Chairman Kevin Brady (R-Texas) told reporters that he remains at the table in the negotiations, while chiding Democrats for enacting the taxes in the first place.

“My sense is that Democrats want to tackle the medical device tax, and delay it, the health insurance tax is very damaging, and the Cadillac tax as well,” Brady said. “One key question is, why did they put them in place in the first place if they’re this damaging to families and businesses and jobs?”

“We’re at the table, we’re hopeful Democrats will stay at the table with us and work this out,” Brady added.

Some argue that delaying the medical device tax and the health insurance tax are more pressing because they are set to go into effect in 2018. The Cadillac tax is not set to take effect until 2020. But opponents of the tax argue that businesses and unions have to negotiate contracts ahead of time, and need to know the rules of the road looking ahead.

A leading proposal on the medical device tax has been to delay it for two years, although the medical device industry is still pushing for full repeal.

The health insurance tax could be delayed for only one year, to 2019, given that some argue it is too late to make a difference in 2018 premiums. Health insurers are still pushing for a longer delay, though.

Courtney warned that whether Cadillac tax delay makes the cut will be a sign of whether Republicans are really saving it for broader action next year.

“If they don’t include the Cadillac tax then I would say people really better be on their toes next year,” he said.