November 8, 2019

The ‘Cadillac Tax’ May Finally Be Repealed

The much-maligned “Cadillac tax,” which was supposed to be implemented as a tax on high-value group health plans with premiums above a certain level, may finally be seeing the end of the road.

Already the implementation of the tax, which was created by the passage of the Affordable Care Act, has been postponed twice. It was originally supposed to take effect in 2018 under the ACA. The tax was delayed two years by Congress in 2016, pushing implementation ahead to 2020. It was delayed again in 2018 and is currently scheduled to take effect in 2022.

But now the House has overwhelmingly voted to ditch it once and for all.

The Cadillac tax is an excise tax that applies to any group health policy that would cost more than $11,200 for an individual policy, or $30,150 for family coverage. Starting in 2022, a 40% tax would apply to any premium above those levels (so if an individual policy cost $12,000 a year, the tax would apply to the $800 excess over the $11,200 level).

Although the insurance company would have to pay the tax, it is widely believed that insurers would pass it on to the employer.

Widespread distaste for the tax

The tax was maligned by both employers and labor unions, many of which receive generous benefits packages that would have been subject to the tax. Labor disliked it because they felt that employers would cut benefits to avoid paying it or pass the tax on to employees. Employers disliked the tax because, well, it’s another tax – and a hefty one at that.

But supporters of the ACA said the tax was necessary to pay for the law’s nearly $1 trillion cost and help stem the use of what was seen as potentially unnecessary care.

While there is widespread support for repealing the tax, not everyone is on board. A group of economists and health experts wrote a letter to the Senate on July 29 in which they argued that the tax “will help curtail the growth of private health insurance premiums by encouraging employers to limit the costs of plans to the tax-free amount.”

The letter also pointed out that repealing the tax “would add directly to the federal budget deficit, an estimated $197 billion over the next decade, according to the Joint Committee on Taxation.”

This summer, the House of Representatives voted 419 to 6 to repeal the tax. Currently, a Senate companion bill has 61 co-sponsors, but the legislation has not yet come up for debate.

That said, most observers expect that the bill will soon be put up for a vote, meaning that the Cadillac tax will likely be sent to Cadillac ranch – having never seen the light of day.

July 16, 2019

Congress, Administration Serious About Tackling Health Care Costs

As more people struggle with their medical bills, Congress has been introducing a raft of new legislation aimed at cutting costs and making pricing more transparent.

The multi-pronged, bipartisan effort targets the lack of transparency in pricing particularly for pharmaceuticals, as well as surprise medical bills that have left many Americans reeling, and there are also other efforts aimed at reducing the cost burden on payers: the general public and employers.

And since consumers are affected regardless of their political affiliation, congresspersons are reaching across the aisle to push through legislation to address this crushing problem.

There are several draft proposals, but word is a number of bills are expected to be introduced soon.

Surprise medical bills

One of the top priorities seems to be surprise medical bills, which are in the administration’s crosshairs. President Trump in January 2019 hosted a roundtable to air the problems people face when hit with what are often financially devastating surprise bills after they venture out of their network for medical services for both emergency and scheduled medical visits.

After the roundtable, he directed a bipartisan group of lawmakers to create legislation that would provide relief. The House Energy and Commerce Committee in May responded by introducing draft legislation that aims to ban surprise medical bills.

Also, Sen. Maggie Hassan (D-N.H.) and Sen. Bill Cassidy (R-La.) have said they hope to introduce legislation to end the practice of surprise bills. With the White House and both sides of the aisle talking the talk, observers say that there are a number of ways legislation could tackle these surprise bills. That could include:

  • Setting caps on how much hospitals and service providers can charge, or
  • Requiring hospitals and service providers to turn to the insurance company (and not the patient) when they are seeking additional reimbursement.
  • Requiring the insurer to share more of the cost burden for the out-of-network services.

At this point legislation is still being formulated, but chances are good that we could see a bipartisan push to fix this problem. The biggest issue will be how to calculate what are “reasonable” costs for out-of-network services.

Pharmaceutical costs, transparency

The Trump administration has also made it a priority to reduce the costs of medications and tackle pricing transparency in the system.

While both Republicans and Democrats have decried the skyrocketing costs of prescription medications, the inflation for which is outpacing all other forms of medical care, so far there has been only one piece of legislation introduced tackling transparency.

Unfortunately, it’s part of a larger bill that aims to preserve the Affordable Care Act and reverse some recent policy decisions by the Trump administration, so the chances of that measure going anywhere in the Senate are slim to none.

The good news is that members from both parties have been talking about cooperating on legislation, and political observers say the chances are good some type of measure will be introduced this summer.

Other costs

Sen. Ron Wyden (D-Ore.) in February introduced legislation that would require insurers to tell people what they would have to pay out of pocket for any in-network treatment or prescription drug.

On top of that, the Senate Health Committee will soon introduce a number of bills aimed at reducing frictional costs in the system.

In addition, the Senate Finance and Judiciary committees are both in the process of formulating measures aimed at reducing health care costs, as well as prescription drug prices.