It’s been a busy week on Capitol Hill. Maybe you’d heard. Lost in the presidential politics and Democratic din, the House paused on Wednesday to finally deliver a bipartisan whooping to an unpopular element of the Affordable Care Act. By a vote of 419-6, the so-called “Cadillac Tax” is no more, dead before it was allowed to begin. The tax, designed to keep health care costs down, had early supporters in each party, but was widely opposed by both.
The Cadillac Tax was to impose a 40% tax on health insurance plans worth around $10,200 for individuals, and $27,500 for families. The implementation of the unpopular tax was delayed several times, most recently until 2022. The point was to encourage employers to offer less-expensive plans with fewer benefits. This would discourage workers from overusing medical services, and thus, control health care costs. The Cadillac Tax would also be used to fund Obamacare programs and services.
Economic and policy advisors to the Obama administration argued the tax would only hit the wealthiest executives, most generous union plans, and major companies. In turn, employers would give their workers raises. The reality, even without the tax, has been somewhat different. Many who choose these Cadillac plans are public employees— teachers and other state workers— not just the rich. Increased deductibles have largely gobbled up wage increases for employees. The tax would also have hit more employers in the long run. The tax would have increased with inflation, but health care costs do not. Thus, according to the Kaiser Family Foundation, while 21% of employers would’ve faced the tax in 2022, some 37% would be hit by 2030.
Both unions and businesses opposed the Cadillac Tax, and a substantial majority in Congress viewed it as hurting the middle class. “After a decade of fiercely debating the merits of the Affordable Care Act, I hope we have turned a corner today and can now focus on strengthening the parts of the law that work in the manner we’d intended and changing the parts of the law— which is not unusual— that we believe could be improved,” said Rep. Richard Neal (D-MA), Chair of the House Ways and Means Committee. “I’m sure people back home are saying, ‘they can’t do anything,’” Rep. Mike Kelly (R-PA) added. “Well, I’m here to tell you, today that’s just not true. You are going to see a real bipartisan effort today.”
Politics makes for strange bedfellows, and the Cadillac Tax was no exception. Sen. John McCain campaigned on it when he ran for president in 2008, so did Sen. Marco Rubio in 2015. The Obama administration, of course, supported and defended the tax, even as they and Congress kicked it further down the road. Deficit hawks also supported the tax, and raised alarm at its repeal. The Joint Committee on Taxation estimates the repeal of the Cadillac Tax will cost $197 billion over ten years. This will, as Paul Van de Water, a senior fellow at the Center on Budget and policy Priorities, told CNBC, “add to our deficit.”
Finally putting the Cadillac Tax out of its misery was one of the first pieces of legislation considered by the House, after a centrist-backed rule was passed forcing votes on bills with at least 290 cosponsors. Rep. Joe Courtney’s (D-CT) bill had 369. It’s not known whether or not the Senate will consider it, although a version of their own already has 40 cosponsors. In a time of almost unprecedented ideological and partisan nastiness, members of Congress coming together to solve a bipartisan problem must’ve been a welcome sight.