U.S. House votes to repeal ‘Cadillac tax’

The U.S. House of Representatives voted overwhelmingly in July to repeal the Affordable Care Act’s “Cadillac tax,” an excise on high-cost, employer-sponsored health plans intended to encourage employers to offer lower-cost health plans.

The tax, opposed by legislators of both parties in both chambers of Congress, would assess a 40 percent annual excise on individual health plans that cost more than $11,200 per year and family plans that cost more than $30,150. The tax, which would apply to premium amounts that exceed the thresholds, has not gone into effect because Congress has voted several times to delay its implementation.

Due to the higher cost of health care in Massachusetts, municipal employers here were expected to reach Cadillac tax thresholds faster and in greater numbers than employers in other regions of the country. Many Massachusetts employers use benefit plans to attract and retain top-notch employees, and municipal labor unions have negotiated for premium plans through collective bargaining.

The Cadillac tax thresholds are scheduled to rise more slowly than health care inflation, meaning that more plans will be subject to the tax over time. Health care economists defend the tax as a way to control health care spending, but unions and employers both oppose it.

A repeal of the tax would significantly affect efforts to use the tax code to reform the employer health insurance system. According to estimates from the Congressional Budget Office, repealing the tax will cost the government almost $200 billion over the next 10 years.

A Senate bill to repeal the Cadillac tax is under consideration by the Senate Finance Committee.

Municipal employers are advised to wait until a bill is signed by the president before altering strategies that were created to deal with the tax. Currently, the tax is due to take effect in 2022.