Bill delays health law taxes
Groups applaud ‘Cadillac tax’ change
Business groups on Wednesday applauded the proposed two-year delay of the “Cadillac tax” for the Affordable Care Act that was included in the tentative federal spending deal, while experts said the revenue the government would lose by postponing the tax — and the effect on the law — is minimal.
The delay from 2018 to 2020 in the tax on generous health care benefits provided by employers won’t do much, because only 1% of plans will be affected when the tax first takes effect, said John Goodman, a health economist who runs the Goodman Institute for Public Policy Research. He also said he doubted the tax would raise the $87 billion over 10 years predicted by the Congressional Budget Office, partly because companies and unions will try to avoid paying it.
“Any company or union that pays a Cadillac tax is not very smart,” Goodman said.
The budget deal’s two-year elimination of the 2.3% tax on medical devices that took effect in 2013 also will do little, said Tim Jost, an emeritus professor at the Washington and Lee University School of Law and an ACA supporter. Although a January CBO report estimated the tax would bring in $29 billion in net revenues over 10 years, Jost said it would only raise about $4 billion over the next two years.
The Cadillac tax, Jost said, would only raise $10 billion in that period.
The two changes only increase “the budget deficit and apparently this Congress doesn’t care about the budget deficit,” Jost said. “It’s not like it was going into a piggy bank and coming out for the ACA.”
The Cadillac tax, Jost said, is a “ham-fisted way to cut spending and raise revenue.”
The delays in the taxes could be the first steps toward their elimination, said some groups that applaud the changes. The Alliance to Fight the 40, a group of Cadillac tax opponents, said Congress realized it was bad for businesses, families and retirees depending on employer-sponsored health benefits.
The U.S. Chamber of Commerce has pushed for repeal of the medical device tax, saying it would hurt the industry’s ability to create and keep good jobs in the United States and hinder the development of new treatments.
Those fears were mostly hype, concluded a January Congressional Research Service report.
The 2.3% tax actually nets out to just 1.4% because companies can deduct the cost of paying it as a business expense.
The medical device tax change, and a separate one-year delay on a tax paid by insurers, are examples of “fiscal irresponsibility,” said Ron Pollack, executive director of Families USA, which supports the ACA. They don’t, however, “undermine the ACA funding structure in any way.”
The bill also prohibits the Obama administration from using taxpayer dollars to repay insurance companies for losses they incur by offering plans on the ACA exchanges. Instead, the money is supposed to be paid through a fee on profits insurers make from exchange plans, although that wasn’t enough to repay losses this year. Three major insurers have said recently they are losing money on the exchanges.