Leaked House Reconciliation Bill Repeals Cadillac Tax But Caps Tax Exclusion for Employer Health Benefits

February 24, 2017

A draft House GOP reconciliation bill to repeal and replace the Affordable Care Act which leaked to Politico today would reduce the employer penalty to zero and repeal the Cadillac Tax, but cap the tax exclusion for employer-provided benefits at the 90th percentile of the cost of self-only and other than self-only coverage, based on our initial analysis.  According to the latest Kaiser Health Benefit Survey, the cap for self-only coverage would be between $8,000 and $9,000, and the cap for other than self-only coverage would be between $22,000 and $24,000.  The tax caps would be indexed to the Consumer Price Index plus 2 percentage points.  According to the draft, the cap on the tax exclusion appears to be the only source of revenue in the reconciliation bill to pay for the new tax credits to purchase individual coverage and state innovation grants.  We would caution that the leaked draft should be considered the starting point of the reconciliation process and could be significantly changed before it is introduced in or passed by the full House.  The final legislation will also be shaped by findings from the CBO about how much it will cost and what its impact will be on the federal deficit.  The draft bill illustrates that under congressional budget rules, the vast majority of ACA mandates that concern employers cannot be addressed in any budget reconciliation bill.  This includes all of the benefit mandates and waiting period limitations.  The Association will provide more details once we conduct a thorough analysis of the draft bill.  In addition, on March 2nd, HR Policy Vice President Mark Wilson will join with speakers from other business groups in a bipartisan briefing on Capitol Hill on the need to protect employer-sponsored health care (including tax preferences) in the ongoing debate.  This draft bill will be a topic of that discussion.  We encourage you to have your company represented at that meeting.