Cadillac tax dispute complicates Congress' talks over health insurance tax delay

U.S. Capitol with flag
As fiercely as the health insurance industry has lobbied Congress to get rid of the HIT, employers have done the same for the Cadillac tax. (Getty/Andrea Izzotti)

Lawmakers’ plan to further delay the health insurance tax has hit a snag—in the form of another unpopular Affordable Care Act tax.

That tariff is none other than the Cadillac tax, which applies to costly employer-sponsored plans. In behind-the-scenes negotiations about Congress’ year-end spending bill, Democrats are pushing to delay it two years, but Republicans are resisting, The Hill reported.

The GOP, some Democrats and business lobbyists told the publication, may be planning to use the threat of the Cadillac tax as leverage next year—when it’s aiming to enact policies that limit the tax-exempt status of employer plans.

RELATED: Republican senators consider tax on employer-sponsored plans in healthcare bill rewrite

Regardless of Republicans’ reasons, however, the dispute over the Cadillac tax has led to a stalemate in Congress’ talks regarding two other levies: the health insurance and medical device taxes.

One recently floated GOP plan was to delay the health insurance tax (HIT) only for certain types of plans next year, then delay it for all markets in 2019. But the health insurance industry has long lobbied for a full repeal—an effort that successfully prodded lawmakers to enact a one-year delay of the tax for 2017. With the moratorium set to expire come 2018, industry-funded research has warned that the tax’s return will drive up premiums.

As fiercely as the health insurance industry has lobbied to get rid of the HIT, employers have done the same for the Cadillac tax. While the Obama administration argued the tax would promote affordability and innovation in employer-sponsored plans, critics contended that providers—not coverage purchasers—should bear the burden of reducing costs.

For his part, House Ways and Means Committee Chairman Kevin Brady, R-Texas, told The Hill that he questions why Democrats are now so intent on delaying taxes that their own party included in the ACA.

“One key question is, why did they put them in place in the first place if they're this damaging to families and businesses and jobs?” he asked.

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