July 28, 2015
- Council and Others Formally Launch Coalition Seeking Repeal of 40 Percent (“Cadillac”) Tax
- Trustees Unveil Reports on Social Security, Medicare Trust Funds
Council and Others Formally Launch Coalition Seeking Repeal of 40 Percent (“Cadillac”) Tax
Earlier this spring the American Benefits Council reached out to a diverse group of organizations – business associations, unions, and public sector employers – to join together in seeking Congressional repeal of the 40 percent tax on high cost health plans, the so-called Cadillac tax, enacted as part of the Patient Protection and Affordable Care Act (PPACA). The result was establishment of the Alliance to Fight the 40 to complement the advocacy already underway by the Council, itself, and numerous other business groups and unions. The Alliance members have devoted the past several weeks to making numerous Capitol Hill visits to explain the negative implications of the tax.
The Alliance was formally launched on July 28 with a media briefing featuring both private sector and public sector employer groups, labor unions, and the two Members of Congress who have authored legislation to repeal the tax: Rep. Frank Guinta (R-NH) and Rep. Joe Courtney (D-CT).
Pursuant to PPACA, starting in 2018 a nondeductible 40 percent excise tax will be imposed on employer-sponsored coverage that exceeds certain thresholds ($10,200 for self-only, $27,500 for family). A Benefits Blueprint reviewing the statutory requirements of the 40 percent tax and a companion document with answers to certain “Frequently Asked Questions”, are available on the Council website (see the March 30 Benefits Byte).
“Our coalition highlights that protecting employer-sponsored health coverage is not solely just a union or business or public sector or private sector issue. The tax puts at risk the employer-sponsored health system covering over 150 million Americans. Even the Office of Personnel Management, the federal government's human resources department, acknowledges that the tax will most likely require reducing health coverage and eliminating other benefits for federal employees,” said Council president James Klein, in his comments during the media briefing.
During the briefing numerous questions were posed by the media about the $87 billion revenue the Congressional Budget Office (CBO) estimates the provision will raise over the next 10 years. Both Rep. Courtney and Rep. Guinta, as well as Alliance members took issue with that estimate, noting its flawed premise that three quarters of the revenue is projected to be raised by employers reducing health benefits and then “making it up to workers” in the form of higher, taxable, wages.
“Ironically,” Klein noted, “if the CBO is right and we are wrong, then the 40 percent tax will represent a massive tax hike on working Americans. But if we are right and CBO is wrong, then the expected revenue will never materialize.”
The Alliance has already received extensive media coverage, including stories in the New York Times, Modern Healthcare, The Hill, Politico, American Public Media’s Marketplace, and a reference (without specifically mentioning the Alliance by name) in the Washington Post to a “high-powered new lobbying alliance.”
Trustees Unveil Reports on Social Security, Medicare Trust Funds
The Trustees of the Social Security and Medicare Trust Funds released the 2015 Annual Report of the Board of Trustees of the Federal Old-Age and Survivors Insurance (OASI) and Federal Disability Insurance (DI) Trust Funds and the 2015 Medicare Hospital Insurance (HI) Trust Fund report on July 22.
The combined cost of Social Security and Medicare in 2014 was 8.5 percent of GDP, up from 8.4 percent in 2013. The Trustees project an increase to 11.4 percent of GDP by 2035 and to 12.2 percent of GDP by 2089. Medicare’s relative cost (3.5 percent of GDP) is expected to rise gradually from 71 percent of the cost of Social Security (5.0 percent of GDP) in 2015 to about 97 percent by 2089.
Additionally, the reports notes:
- The Social Security Disability Insurance Trust Fund is projected to be insolvent by late 2016 and urgently requires corrective action to avoid reductions and interruptions to benefit payments to 10.9 million disabled Americans.
- The combined OASDI funds will be depleted by 2034, an improvement from last year’s report by one year.
- The Medicare Trust Fund will be depleted by 2030, which is the same time frame as was projected last year. A significant portion of Medicare funding must, however, be kept automatically solvent by statutory design through general revenue transfers.
Again this year, the Trustees concluded their report by noting, “Lawmakers should address the financial challenges facing Social Security and Medicare as soon as possible. Taking action sooner rather than later will permit consideration of a broader range of solutions and provide more time to phase in changes so that the public has adequate time to prepare.”
For more information, contact Diann Howland, vice president, legislative affairs, at 202-289-6700.