Employer-provided health insurance accounts for the single largest share of the insured population today, and for decades WGAW has supported efforts to control skyrocketing health care costs while opposing misguided attempts to unfairly tax health care plans. The source of high costs in the health care system is a lack of competition among health care suppliers and an absence of price regulation, and not individuals’ insulation from the cost of health care.
WGAW consistently opposed the Affordable Care Act’s 40% excise tax on employer-sponsored health plans, dubbed the “Cadillac Tax” because it targeted high-quality, comprehensive plans. WGAW advocated for the tax’s repeal for several years, lobbying legislators in meetings and letters to repeal the tax and highlighting the importance of the issue with candidates in person and through the WGAW PAC’s candidate questionnaire.
The “Cadillac Tax” was permanently repealed on December 20, 2019.
WHAT IS THE “CADILLAC TAX” AND WHY DID THE WGAW OPPOSE IT?
Overview of the Cadillac Tax
- The ACA imposed a 40% excise tax, also known as the “Cadillac Tax,” on high-cost employer sponsored health plans—those that cost over $11,200 annually for individuals or $30,150 annually for families.
- Under the U.S. tax code’s employer-sponsored insurance (ESI) exclusion, employer-sponsored health benefits are not taxed, unlike other forms of compensation. The majority of Americans receive tax-free health insurance coverage through their employers.
- The tax was originally set to begin in 2013 but was delayed multiple times until its ultimate repeal in December 2019. It had been one of the most unpopular aspects of the ACA, and efforts to repeal the tax picked up in the 116th Congress.
Why We Opposed the Cadillac Tax
- Reduced health care benefits: If the tax were enacted, employers would have likely tried to avoid it by reducing benefits, shifting costs onto employees and their families. This would undermine the high-quality health insurance that the WGAW bargains for and that every American deserves.
- The tax would not contain health care costs: Rather than incentivizing individuals to be more cost-conscious, greater exposure to health care costs results in individuals cutting back on all care, leading to poorer health outcomes. Health care costs are driven by the lack of competition or price regulation in health care supply, leaving plans and workers facing high prices for common drugs, office visits and procedures.
- Disproportionate impact: Since the Cadillac Tax did not include adjustments for demographic or geographic factors it would have disproportionately impacted certain groups of people, including workers in regions of the U.S. with high health care costs.
- Growing harm over time: The Cadillac Tax as designed was indexed to inflation, so the number of health insurance plans subject to the tax would grow over time, as health insurance premiums traditionally rise faster than the rate of inflation.
As premiums and out-of-pocket costs have risen sharply in recent years, opposition to the Cadillac Tax surged, and it was strongly opposed by the labor unions nationwide.