On May 4, the House of Representatives passed H.R. 1628, the American Health Care Act (AHCA), a reconciliation bill to repeal and replace portions of the ACA. It will now be considered by the Senate, where it is expected to be significantly altered, including possibly addressing two critical NAHU policy priorities: the employer exclusion of health insurance and the Cadillac/excise Tax. NAHU strongly opposes any efforts that would undermine the employer-sponsored health insurance system by eliminating or placing a cap on the employer-tax exclusion for health insurance and is strongly advocating a full repeal of the Cadillac/excise Tax, which under the AHCA would only be temporarily delayed.
More than 175 million Americans, including those covered by unions, currently receive their coverage through the employer-based system, largely due to the tax exclusion where employers provide contributions for an employee’s health insurance that are excluded from that employee’s compensation for income and payroll tax purposes. Proposals that would cap the exclusion would devalue the benefit and serve as one of the largest tax increases in history for middle-class Americans, forcing many to drop employer-sponsored insurance, including dependent coverage, and be forced to seek coverage in the volatile individual market, where premiums are ever-increasing. Employers would be incentivized to only offer coverage to their employees that would fall below the value of the cap in order to avoid paying any increased taxes, potentially resulting in a race to the bottom for employers to sponsor insurance that wouldn’t meet the cap’s thresholds and further shifting costs onto employees.
In addition to opposing proposals to cap the exclusion, we are strongly advocating a complete repeal of the Cadillac/excise Tax. Currently set to take effect in 2020 under a two-year delay, this tax calls for a 40% excise tax on the amount of the aggregate monthly premium …
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