Obama’s “Cadillac Tax” may be a casualty of Hillary Rodham Clinton’s campaign trail, a source has confirmed.
Clinton, who is vying for the Democratic Presidential nomination, has chosen to form an unspoken union with Independent candidate Bernie Sanders and the Republican party against Obama’s Cadillac Tax. Don’t get her wrong, she supports Obamacare as a whole and says that it is “generally effective,” but she has singled out this tax alone. Clinton’s aides informed Randi Weingarten, the president of the American Federation of Teachers, that she would be devoting this week and next to attempting to find ways to fix President Obama’s signature health care law, focusing on the Cadillac Tax . Chances are she won’t get it repealed before the tax takes effect in 2018. Her decision to attempt to repeal the Cadillac Tax has gained her alliances with unions, while distancing herself from President Obama. This move could also inspire unions who haven’t endorsed her campaign yet to provide some monetary support.
Obama’s Cadillac Tax, in a nutshell , is thought to be an attempt at rolling back an existing tax break, one that has been around since the mid-20th century and as many experts believe, is a major contribution to rising health insurance premiums. It is a 40 percent charge on employer-based health plans that exceed certain amounts: $10,200 for individual coverage and $27,500 for family coverage. Every dollar over the threshold is taxed at the 40 percent rate. It is expected to hit one out of four employers when the tax begins in 2018 and rise steadily thereafter. The tax is considered an important part of the Affordable Care Act: it generates revenue and could possibly slow the health care cost inflation. The International Foundation of Employee Benefit Plans, after surveying companies who are targeted by the tax, revealed that 62 percent of companies facing the Cadillac tax hit in 2018 are already changing their coverage to avoid it. Unions are particularly against the Cadillac Tax, as they usually negotiate for generous health care benefits.
What does it mean for Americans if their employers make the changes to escape paying a non-deductible tax? There would be higher deductible health care plans, reductions in benefits, loss of high cost plans, and more money that Americans have to pay out-of-pocket. Although Clinton knows this, she stated that she is seeking to repeal the tax because “too many Americans are struggling to meet the cost of rising deductibles and drug prices.” However, if no one pays the tax, how will Obamacare be funded? Only 2.5 percent of companies stated that they will pay the tax; economists believe that once the Cadillac Tax takes effect , employers will find ways to spend less on health care plans, possibly giving employees lower premiums and higher take-home pay. With the lower premiums, employees with serious and/or chronic medical conditions will end up owing more.
The federal government does benefit from the Cadillac Tax by way of helping to offset the costs of expanding Medicaid and health insurance tax credits that are helping literally millions of Americans obtain health insurance. The Congressional Budget Office has estimated that the Cadillac tax will net $5 billion in 2018 alone, with it increasing to $34 billion by 2024. Clinton’s plans to repeal the tax state that she will help find other outlets to replace the lost revenue from the Cadillac Tax.
Larry Levitt, senior vice president of the Kaiser Family Foundation, weighed in on the Cadillac Tax as well.
“As with so many health care issues, the Cadillac plan tax comes with difficult trade-offs. It raises a substantial amount of revenue to help cover people who are uninsured and has a powerful effect on the health spending trajectory, but all of that comes with cutbacks in health benefits that would anger workers. There is now substantial opposition to the Cadillac plan tax, but before its epitaph gets written there will need to be a consensus around how the replace the revenues it raises and how to constrain health spending in some other way.”
It is currently unknown when Clinton will be addressing the Cadillac Tax or her plans to repeal it.
[Photos by Charlie Neibergall/Associated Press; Brian Frank/Reuters; Scott Eisen/Getty Images.]
