Killer ‘Cadillac’ tax: Even Democrats are angry
here’s one part of ObamaCare that even many Democrats hate – the so-called Cadillac tax on generous health plans.
It doesn’t go into effect until 2018, but employers know it’s coming and are already cutting health benefits to stay under the Cadillac line. It’s clobbering workers and roiling union negotiations across the country.
The growing uproar over this tax may even present an opportunity for Republicans in Congress to woo enough Democratic votes to pass changes to ObamaCare and overcome President Obama’s likely veto.
As far back as 2009, the president said he wanted to penalize “fancy plans that end up driving up costs.” The Affordable Care Act slapped a 40 percent tax on these plans, starting in 2018.
Yet it’s not just fancy people who have these plans. Over the years, countless blue-collar and union workers have opted for these generous benefits instead of wage hikes. That’s why AFSCME leader Gerald McEntee blasted Obama’s idea as “bulls___.”
Now the manure is hitting the fan. In 2018, about half of companies will have to pay the tax if they don’t first reduce benefits below what Washington considers “excessive”: $10,200 for individuals and $27,500 for families. Companies are already raising deductibles and copays or skimping on coverage, according to Towers Watson benefit consultants.
Not that the president’s team ever admitted that ObamaCare would tax health benefits – quite the contrary.
When ObamaCare required the value of your health benefits to be reported on you W-2, raising fears that it would be taxed, White House spokesperson Stephanie Cutter said, “Don’t believe it…you will absolutely not pay taxes on these benefits.”
In 2011, ObamaCare architect Jonathan Gruber told a select audience that he thought the administration would get away with the deception by “mislabeling it, calling it a tax on insurance plans rather than a tax on people.”
Union leaders weren’t fooled. In July 2013, three large unions, including the Teamsters, sent a letter to congressional Democrats warning that the tax “will destroy the very health and well being of our members.”
Recalling Obama’s promise that “if we liked the health plans we have now, we could keep them,” the union leaders were blunt: “We voted for you. We have a problem: You need to fix it.”
But Congress didn’t. So now unions going into contract talks are faced with losing their gold-plated health benefits.
Public-sector unions customarily have the richest benefits. They – or taxpayers – have the most to lose.
From San Antonio, Texas, to Columbus, Ohio, and New Hampshire to California, governments are preparing to raise deductibles and reduce benefits.
Benefit packages for police in some New Jersey towns run $44,000 per family. Chris Christie reminded constituents that it was Obama – “not the Republican governor of New Jersey” – who labeled the state’s health benefits as “a Cadillac plan.”
Here in New York, Mayor de Blasio is evading the issue as he negotiates contracts with the major municipal unions. Rather than force the unions to compromise on benefits, he’s pretending the city can stay below the taxable Cadillac level by achieving “health-care savings,” whatever that means.
If those mystery savings don’t materialize, local taxpayers will get socked with actually paying the whopping 40 percent tax, something most other municipalities deem unaffordable.
For example, cities in New Hampshire also wanted to kick the can down the road, but without taking the same risk of getting clobbered. So they insisted health benefits will automatically be renegotiated if the Cadillac tax threatens.
With unions feeling the pressure on their health benefits, Republicans in Congress should draft legislation to repeal the Cadillac tax, and attach it to any ObamaCare “fix” they’re serious about actually enacting.
For example, the House recently passed a bill to restore the 40 hour work week, but with only 252 votes, shy of the two-thirds majority needed to override a veto.
It’s likely more Democratic votes are there for the asking. At the last AFL-CIO convention, union leaders fired up over ObamaCare framed a resolution to “nurture relationships with members of all parties.”
It quoted the great labor leader George Meany’s view of the Democratic Party: “We don’t run them, and they don’t run us.”
Betsy McCaughey is chair of the Committee To Reduce Infection Deaths and a senior fellow at the London Center for Policy Research.