Cadillac The tax was always anunpopular and controversial part of the 2010 health law because theexpectation was that employers would cut benefits to avoid payingthe tax. (Photo: Shutterstock)

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The politics of health care are changing. And one of the mostcontroversial parts of the Affordable Care Act — the so-calledCadillac tax — may be about to change withit.

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The Cadillac tax is a 40 percent tax on the mostgenerous employer-provided health insurance plans — those thatcost more than $11,200 for an individual policy or $30,150 forfamily coverage. It was supposed to take effect in 2018, butCongress has delayed it twice. And the House recently votedoverwhelmingly — 419-6 — to repeal it entirely. A Senate companion bill has 61co-sponsors — more than enough to ensure passage.

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The tax was always an unpopular and controversial part of the2010 health law because the expectation was that employers wouldcut benefits to avoid paying the tax. But ACA backers said it wasnecessary to help pay for the law’s nearly $1 trillion cost andhelp stem the use of what was seen as potentially unnecessary care.In the ensuing years, however, public opinion has shifteddecisively, as premiums and out-of-pocket costs have soared. Nowthe biggest health issue is not how much the nation is spending onhealth care, but how much individuals are.

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Related: House votes to repeal Cadillac tax

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“Voters deeply care about health care still,” said HeatherMeade, a spokeswoman for the Alliance to Fight the 40, acoalition of business, labor and patient advocacy groups urgingrepeal of the Cadillac tax. “But it is about their own personalcost and their ability to afford health care.”

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Stan Dorn, a senior fellow at Families USA, recently wrote in the journal Health Affairs that the backersof the ACA thought the tax was necessary to sell the law to peopleconcerned about its price tag and to cut back on overly generousbenefits that could drive up health costs. But transitions inhealth care, such as the increasing use of high-deductible plans,make that argument less compelling, he said.

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“Nowadays, few observers would argue that [employer-sponsoredinsurance] gives most workers and their families excessivecoverage,” he wrote.

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The possibility of the tax has been “casting a statutory shadowover 180 million Americans’ health plans, which we know, from HRadministrators and employee reps in real life, has added pressureto shift coverage into higher-deductible plans, which falls on thebacks of working Americans,” said Rep. Joe Courtney (D-Conn.).

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Support or opposition to the Cadillac tax has never broken downcleanly along party lines. For example, economists from across theideological spectrum supported its inclusion in the ACA, and manycontinue to endorse it.

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“If people have insurance that pays for too much, they don’thave enough skin in the game. They may be too quick to seekprofessional medical care. They may too easily accede whenphysicians recommend superfluous tests and treatments,” wrote N.Gregory Mankiw, an economics adviser in the George W. Bushadministration, and Lawrence Summers, an economic aide to PresidentBarack Obama, in a 2015 column. “Such behavior can drive national healthspending beyond what is necessary and desirable.”

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At the same time, however, the tax has been bitterly opposed byorganized labor, a key constituency for Democrats. “Many unionshave been unable to bargain for higher wages, but they have beentaking more generous health benefits instead for years,” saidRobert Blendon, a professor at the Harvard T.H. Chan School ofPublic Health who studies health and public opinion.

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Now, unions say, those benefits are disappearing, with premiums,deductibles and other cost sharing rising as employers scramble tostay under the threshold for the impending tax. “Employers areusing the tax as justification to shift more costs to employees,raising costs for workers and their families,” said a letter to members of Congress from the Service EmployeesInternational Union.

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Deductibles have been rising for a number of reasons, thepossibility of the tax among them. According to a 2018survey by the federal government’s National Center for HealthStatistics, nearly half of Americans under age 65(47 percent) had high-deductible health plans. Those areplans that have deductibles of at least $1,350 for individualcoverage or $2,700 for family coverage.

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It’s not yet clear if the Senate will take up the House-passedbill, or one like it.

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The senators leading the charge in that chamber — Mike Rounds(R-S.D.) and Martin Heinrich (D-N.M.) — have already written to Senate Majority Leader Mitch McConnell tourge him to bring the bill to the floor following the House’soverwhelming vote.

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“At a time when health care expenses continue to go up, andCongress remains divided on many issues, the repeal of the CadillacTax is something that has true bipartisan support,” the lettersaid.

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Still, there is opposition. A letter to the Senate on July 29 from economists and otherhealth experts argued that the tax “will help curtail the growth ofprivate health insurance premiums by encouraging employers to limitthe costs of plans to the tax-free amount.” The letter also pointedout that repealing the tax “would add directly to the federalbudget deficit, an estimated $197 billion over the next decade,according to the Joint Committee on Taxation.”

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Still, if McConnell does bring the bill up, there is littledoubt it would pass, despite support for the tax from economistsand budget watchdogs.

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“When employers and employees agree in lockstep that they hateit, there are not enough economists out there to outvote them,”said former Senate GOP aide Rodney Whitlock, now a health careconsultant.

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Harvard professor Blendon agrees. “Voters are saying, ‘We wantyou to lower our health costs,’” he said. The Cadillac tax, atleast for those affected by it, would do the opposite.

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Kaiser Health News isa nonprofit news service covering health issues. It is aneditorially independent program of the Kaiser Family Foundation,which is not affiliated with Kaiser Permanente.

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