Obamacare Politics Are Scaring Democrats Away From Cadillac Tax Repeal

Sen. Dean Heller might have a much easier time finding a Democratic co-sponsor for his repeal of the Obamacare Cadillac tax if he were a Democrat.

In the lower chamber, 129 Democrats (and 14 Republicans) have co-sponsored Democratic Rep. Joe Courtney’s bill repealing the tax. Even Democratic presidential candidates Bernie Sanders and Martin O’Malley have expressed interest in dumping the tax, and Hillary Clinton said she is “examining” the policy. But Democrats in the Senate have been unwilling to put their names alongside Heller’s on the legislation, not yet ready to join hands with Republicans when it comes to the Affordable Care Act.

“I’m hoping that the dam will break,” Heller, a Nevada Republican, said in an interview last week. “I think if we get one Democrat, we’ll get a lot of Democrats. But right now, we need the first one to step up.”

Senate Democrats’ hesitation to partner with Republicans on a repeal of part of the Affordable Care Act shows that when it comes to this law, bipartisanship is not yet an option and probably won’t be as long as the GOP continues to wage war against it. Democrats don’t want to put their name on a bill that could be used as a messaging device against Obamacare later, according to Senate Democratic aides. They’re afraid the Cadillac tax will be pointed to as one more example of why the law needs to be gutted, and their fears are only reinforced by the GOP’s persistent claims that Obamacare will be repealed if a Republican is in the White House in 2017 and by the party's continued legal challenges to the law.

The so-called Cadillac tax is a 40 percent excise tax on employer-provided health-insurance benefits over a certain threshold that goes into effect in 2018. It was written into the Affordable Care Act to address the government revenue lost by the tax exclusion of employer-provided health care plans. It also aims to contain health care costs and generate revenue for the ACA.

But as its implementation looms in the not-so-distant future, the tax’s supporters seem to be limited to budget hawks, economists, the president, and, with little evidence to the contrary, Senate Democrats. (A second House bill to repeal the tax authored by GOP Rep. Frank Guinta has 87 Republican co-sponsors.)

“Obviously, this is an issue that’s important to unions, so I don’t understand why Democrats are so loath to support them on our side,” Heller said. “On the House side, they’ve got over 100 Democrats that recognize the importance of this legislation and what it does to middle-class families."

“It’s a repeal at this point,” he added, referring to his bill. “If they want to talk an alternative, I’m happy to, if that what it takes to get Democrats on.”

The Heller legislative text is not yet available. The Courtney and Guinta bills are very similar, and neither include pay-fors.

Opponents of the tax say its impact will not be limited to high-cost plans. A Kais­er study found that in 2018, about a quarter of em­ploy­ers of­fer­ing health be­ne­fits could be subject to the tax un­less they change their plans.

The political implications of repealing the Cadillac tax are not the only reason Democrats would oppose it. Without a replacement, a repeal would leave a hole in Obamacare offsets and increase the deficit.

"The excise tax on high-cost employer plans is a key part of how the Affordable Care Act improves the affordability, accessibility, and quality of health care while reducing the deficit," a White House official said. "While the administration is willing to work with Congress to improve the ACA, we oppose legislation that would repeal the high-cost excise tax. Repealing this provision of the ACA would hurt our economy by increasing the deficit, raising health care cost growth, and cutting workers’ paychecks."

It’s also not clear whether the repeal has unanimous Republican support. Not only could it be seen as an acknowledgment of the ACA's permanence, but it is also similar to elements of conservative health care policy, and opposition to the Cadillac tax could hurt the party in the future as it crafts its own policy proposals. A Heller aide said last week the bill had about a dozen Republican co-sponsors, but the office could not provide an updated count.

Senate Democratic aides said members are currently trying to sift through information and determine the facts among all the chatter about the tax that has surfaced recently off the Hill.

The timing of the bill also doesn’t help its case before Democrats. If introduced this week—as Heller said it could be—it would come only a week after a third lawsuit challenging the health care law, brought by the House, moved a step forward. Republicans publicly cheered at the news, a reaction incongruous to efforts to improve the law.

And as theories abound regarding what could be contained in a bill advanced through the Senate using reconciliation, Democrats are watching with skepticism. If a repeal of the Cadillac tax is included in a package of Obamacare repeals sent to the president’s desk with only 51 Senate votes, to Democrats this signals that a stand-alone repeal of the tax is not a response to actual policy concerns but rather a messaging tactic.

But while they won’t co-sponsor the bill yet, some Democrats, like Sens. Sherrod Brown and Debbie Stabenow, are also unwilling to say they’d like to leave the tax as is.

“Senator Brown remains concerned about the so-called ‘Cadillac tax’ and its potential burden on working Americans. He intends to continue working with his Senate colleagues on solutions that will both control health care costs and give Americans quality health care without leaving low- and middle-income workers to pay the bill,” a Brown spokeswoman said.

“Senator Stabenow is supportive of a Cadillac-tax repeal and is hopeful Republicans won’t play politics with the issue,” a Stabenow aide said.