[Congressional Record Volume 161, Number 178 (Wednesday, December 9, 2015)]
[Senate]
[Pages S8535-S8538]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
MIDDLE CLASS HEALTH BENEFITS TAX REPEAL ACT
Mr. HELLER. Mr. President, together we rise to share our concerns
about the devastating impact of the Cadillac tax enacted as part of
ObamaCare. As the Presiding Officer knows, I know, and those around the
country know, the Cadillac tax is a 40-percent excise tax set to take
effect in 2018 on employer-sponsored health insurance plans.
My colleagues from across the country have heard the same concerns
that I have. As both my friend from New Mexico and I have heard, this
40-percent tax will increase costs, significantly reduce benefits, or
result in employers getting rid of their employer-sponsored health care
coverage all together.
This is precisely why Senator Heinrich and I have offered the Middle
Class Health Benefits Tax Repeal Act of 2015, the only bipartisan piece
of legislation that would fully repeal this onerous tax. Our bill has
22 bipartisan cosponsors. We all agree that this tax should be fully
repealed because we know it will have a negative effect on hard-
working, tax-paying Americans. This was clearly demonstrated last week
when the Senate overwhelmingly supported and adopt our amendment to
fully repeal the Cadillac tax by a vote of 90 to 10.
Organized labor, the chamber of commerce, local and State
governments, small businesses, seniors, and, together, 90 percent of
the Senate--we put forth a solution to fix a problem affecting many
Americans and their families. It is very rare these days to see this
much agreement in Washington. Members on both sides of the aisle--
Senator Heinrich and I--came together, listened to what our
constituents had to say, and sent a mandate to the President to repeal
this tax. Today we will discuss why fully repealing the 40-percent
excise tax is so important for middle-class families. Whether it is
through our legislation, which is S. 2045, the Middle Class Health
Benefits Tax Repeal Act of 2015, or through other must-pass
legislation, we hope to address this by the end of the year. Senator
Heinrich and I will do everything we can within our power to repeal
this tax.
I thank the Senator from New Mexico for his leadership in making real
progress in fully repealing the Cadillac tax a reality, as we are here
to speak about today. With our vote last week, the Senate sent a clear
message that we can, and we should, fully repeal this tax. It takes
both sides of the aisle listening to the American people.
With that, I ask Senator Heinrich what he has heard from his
constituents that makes full repeal of the Cadillac tax so important.
Mr. HEINRICH. Mr. President, I start by thanking my colleague,
Senator Heller of Nevada, for his partnership and his leadership in
pushing this issue forward and doing so effectively. I think the
amendment we saw last week speaks to just how bipartisan this has
become and how important it is. These days, there truly aren't many
things around this place where we get a 90-to-10 vote.
This tax, which will go into effect in 2018, was meant to help pay
for other parts of the Affordable Care Act by charging a 40-percent tax
on the highest cost, employer-based health plans. It was supposed to
target only overly generous health plans--the ``Cadillacs on the health
care highways,'' so to speak. In practice, however, the tax has become
more of a ``Ford Focus tax.'' It will impact middle-income families
who, for reasons that are largely outside their control, have health
plans that already or soon will reach their policy limits.
The tax will force many employers to pay steep taxes on their
employees' health plans and flexible spending accounts. It will
possibly eliminate some employer-provided health care plans altogether.
The Cadillac tax has already limited options for New Mexicans to curb
costs and keep plans affordable. Let me give an example. I recently
heard from Jamie Wagoner, the benefits and compensation manager for the
city of Farmington, NM. Under her leadership, the city began
implementing wellness programs to slow the increase in health
[[Page S8536]]
spending--exactly what we all wanted. Unfortunately, the city recently
learned that its wellness programs would ultimately be factored in as a
benefit subject to the Cadillac tax.
It doesn't make sense that benefits designed to promote health and
wellness, and ultimately drive down costs, actually end up triggering
this new tax. This creates an inverted incentive for employers to avoid
preventive benefits, such as wellness programs, that we all know are
central to keeping our health care costs under control.
There are better ways to pay for the good things in the Affordable
Care Act. Doing away with this onerous tax on employees' health
coverage before it goes into effect will protect important benefits for
workers and ensure that businesses and families get a fair deal.
I have always opposed this tax on the middle class, and I worked to
strip it from the ACA when I was a freshman legislator in the House of
Representatives. In New Mexico, small business owners, labor unions,
counties, rural electric co-ops, municipalities--you name it--all
oppose the tax. When was the last time we had a piece of legislation
that united all of those constituencies?
That is why Senator Heller and I introduced the Middle Class Health
Benefits Tax Repeal Act of 2015 to fully repeal this tax. This
bipartisan effort also has companion legislation in the House of
Representatives--legislation that has 178 cosponsors from both sides of
the aisle. There was a vote on an amendment that Senator Heller offered
to include a full repeal of the Cadillac tax in the budget
reconciliation bill, and the amendment was adopted 90 to 10, as my
colleague pointed out.
The landmark reforms in the ACA have given thousands of my
constituents access to affordable, quality health care for the first
time in their lives. But even the strongest supporters of this law know
it is not perfect, and there are some parts of it that we absolutely
need to fix. This is one of them.
Republicans and Democrats need to put aside the partisan politics,
put aside the grandstanding, and remember why Congress passed the ACA
in the first place--to expand access to quality health care for all
Americans. We need to work together to produce pragmatic policy that
helps us achieve that goal.
So I ask my colleague from Nevada specifically how this Cadillac tax,
as it is called, would impact his residents and constituents in the
State of Nevada.
Mr. HELLER. Mr. President, I thank the Senator from New Mexico for
the question. It is a simple answer. That answer is 1.3 million
people--1.3 million Nevadans are affected by this Cadillac tax. There
are 1.3 million workers who have employer-sponsored health insurance
plans, and they will all get hit by this Cadillac tax.
Let me tell you what I am talking about. In this case, we are talking
about public employees across the State. We are talking about service
industry workers, those who work in Las Vegas on the Strip. They will
be impacted by this legislation. We are talking small business owners
across the State of Nevada. They all know they are going to get hit by
this 40-percent excise tax. Not to be left out, of course, are the
retirees, the seniors in the State of Nevada that will also be affected
by this particular tax.
We are talking about three things: reducing benefits, increasing
premiums, and also higher deductibles. Let me repeat the three things
that this excise tax does: It reduces benefits, increases premiums, and
raises deductibles. These are three things that none of us want to see,
not in this Chamber. All these lead to more money being taken out of
the pockets of taxpayers and hard-working families.
For those who supported this law, this tax was intended to go after
high-cost plans provided to the very wealthiest Americans. Clearly, we
see in this colloquy back and forth that is not the case. This is going
to hurt every middle-class, hard-working, tax-paying American.
We know this tax is hard hitting, and it will affect the middle
class. For that purpose, the Senator from New Mexico and I have brought
this legislation to this floor. Again, we will repeat, it was a 90-to-
10 vote--something we don't see very often in this Chamber. I believe
that kind of a vote is a message for every American.
I said on the floor recently when we were having this debate that
nobody in America supports this; nobody in America supports a 40-
percent excise tax on their health care benefits. Nobody does. There
may be a few here in Washington, DC, but when you get outside of
Washington, DC, nobody supports it. That is why we are having this
discussion today, so we can inform not only Nevadans, not only New
Mexicans but our colleagues here in this Chamber how important and how
onerous this is.
Having said that, maybe we can get more information on what the
Cadillac tax really does, and we will hear the answer to that question
from Senator Heinrich.
Mr. HEINRICH. I thank my colleague.
Mr. President, the whole policy objective of the Cadillac tax was
supposed to cap excessive spending as a way to reduce health care
spending and to generate revenue for other parts of the ACA. Obviously,
the popular name of the tax implies that it is only going to hit a few
individuals with gold-plated health insurance plans. When this was
proposed and included in the ACA, people cited Goldman Sachs' executive
health benefits plans as sort of the poster child for the Cadillac
plan. Obviously, they chose very wisely in the way that they branded
this. But this tax targets many plans that aren't gold plated; they are
barely bronze plated. It solidly taxes middle-class workers.
Proponents of the Cadillac tax are operating under the clearly flawed
premise that plans with overly generous benefits are the primary
drivers of increased health insurance programs, and we know today that
is not the case. The data doesn't back it up.
According to a 2014 report, the richness of plan benefits accounts
only for about 6 percent of the overall increases in a plan's premium
growth. The costs of employer health plans are actually driven by
factors that are largely out of the control of the actual beneficiary--
things like the group's size, the health status of the firm's
employees, or the age band for those employees. Geography alone
accounts for 69.3 percent of a plan's premium growth, which obviously
would be completely unaffected.
It is clear that the Cadillac tax will hurt millions of workers,
their families, retirees--all with health plans of modest value. This
includes low- and moderate-income families, people on fixed incomes
because they are retirees, public sector employees, small businesses,
the self-employed, including three-quarters of a million New Mexicans.
Let me put that in perspective: There are only 2 million of us.
I ask Senator Heller, my colleague from the Silver State: What are
employers in the State of Nevada expecting will happen when the
Cadillac tax goes into effect if we aren't able to pass this
legislation?
Mr. HELLER. Mr. President, to answer the question of the Senator from
New Mexico: As he just mentioned, three-quarters of a million New
Mexicans will be affected by this legislation. As I said earlier, 1.3
million Nevadans will be affected. I think we have 3 million, so
roughly half of Nevadans are going to be affected by this excise tax--a
40-percent excise tax.
Fortunately, through Senator Heinrich's hard work and our efforts
here on this floor, again, I repeat, we passed this legislation 90 to
10. I think it bears heavily on the hard work my friend from New Mexico
did to get this in front of this Chamber.
As we can imagine, if 1.3 million Nevadans are affected by this, you
will hear from all of them. You do. You hear from all of them. I have
heard from large companies, I have heard from small businesses, and I
have heard from health care employees such as hospitals and the
American Cancer Society. Organized labor in Nevada has contacted my
office, as have senior citizens throughout my State. They are all
saying the same thing. They are saying: The Cadillac tax needs to be
fully repealed or our employees will experience massive changes to
their health care. I think that bears repeating. The Cadillac tax needs
to be fully repealed or our employees will experience massive changes
to their health care.
[[Page S8537]]
Large employers who negotiate multiyear contracts are seeing this tax
come up quickly for 2018. Yes, this tax goes into effect in the year
2018. As my friend from New Mexico and I know, they are negotiating
these contracts today. For 2018, they are negotiating contracts for
large companies, labor organizations, and even public employees--today
for 2018. That is why it is so important at this moment. They are
planning and negotiating with employers now for how this tax will
impact their employees' benefits within the next 2 years.
I was talking with D. Taylor from the Culinary Union, a prominent
organized labor group in my home State of Nevada, as well as in New
York City and California. D. told me that if Congress doesn't repeal
the Cadillac tax, culinary employees will see massive changes to their
health care plans.
In a letter he sent me in September, urging Republicans and Democrats
to work together on this issue--which we are--he called the 40-percent
excise tax a ``dark cloud . . . that has already started to impact
negotiations and shift costs to [their] members.'' That is what it is
doing to the Culinary Union in Nevada. It is a dark cloud, according to
D. Taylor, and it is already impacting negotiations, shifting costs
over to the employers.
To make matters worse, the chief financial officer of a waste
recycling company, Action Environmental, recently told the Wall Street
Journal that his company would consider getting rid of its employee
coverage altogether because of ObamaCare's Cadillac tax.
Mr. SASSE. Mr. President, will the Senator yield for a question at
some point?
Mr. HELLER. Certainly.
Mr. SASSE. It doesn't need to be now.
Mr. HELLER. Let me finish this.
He said: ``I'd be lying if I said we haven't had that discussion.''
Again, this goes back to the chief financial officer of a waste and
recycling company.
Delta Airlines expects ObamaCare will cost it $100 million per year.
Imagine that, one company--Delta Airlines--and the ACA will cost them
$100 million per year. One reason for new costs is the 40-percent
excise tax on Delta's employee health benefits.
As if Americans don't have enough trouble as it is with issues with
airlines these days, just add a 40-percent excise tax. Some have
identified the Cadillac tax as a tax that just hits unions or a tax
that just hits wealthy Americans, but the Cadillac tax is a tax on the
middle class. I think we know that. I think we understand that. That is
why we saw the vote we did last week. It is a tax on small businesses,
it is a tax on the middle class, and it is a tax on retirees.
With that, I know we have a question from my friend from Nebraska. I
wish to give him an opportunity to raise that question.
Mr. SASSE. Thank you, sir, and the Senator from New Mexico. Thank you
for letting me get in.
I know we don't have a lot of genuine open debates around here, so I
want to be honest. This is a little bit awkward to delicately step onto
the floor.
I was listening to the debate. I wasn't planning to speak, but I
thought I would ask the question. I think the pay-fors in ObamaCare are
problematic across the board. I am not a particular defender of any of
these pay-fors, but I would ask sincerely, Why would you two be
interested in prioritizing changing the tax deductibility or the limits
for people who already have tax-protected insurance, but we are not
talking about any sort of tax break for the small business people who
have none?
The simple fact is we have the particular problems we have in America
in health care because of wage and price controls at the end of World
War II, where if an employee could get an extra dollar of wages, they
would clearly be taxed, but if they got an extra dollar of benefits
through their large employer group, that would be tax-free. That is
limitless, but that tax benefit only applies to people who are in large
groups. If you are in a small business, you don't get any
deductibility.
I am not disagreeing with the specific policy you are advocating, but
I would ask why would we prioritize this policy when there is no
conversation happening on the floor for all the small business men and
women in America, the farmers and ranchers who get absolutely zero tax
protection? I am trying to understand the prioritization.
Mr. HEINRICH. I want to first welcome our colleague from Nebraska to
this conversation. I am sure he has heard a lot about this from his
constituents as well. I think the reason the timing of this is so
critical is because we see the impacts of this coming at the moment. We
still have enough time to do something about it, but we are already
seeing the impacts on people who are negotiating contracts now, the
impacts of business plans for this.
I think the Senator from Nebraska raises a valid question in that we
have a certain incentive built into the current system by virtue of
having large health care plans, employer-based plans not be taxed. I
actually think it points a way to a more reasonable and elegant way to
potentially pay for things in the ACA that some of us value, but that
doesn't mean we shouldn't also have that conversation about individual
plans and small business and farm and ranch plans because obviously
those are people who have a very hard time attaching themselves to
these large pools.
Mr. SASSE. I thank the Senator. I think we all know we need to do
genuine health care reform sometime soon in the future because the
reality is, the No. 1 driver of uninsurance in America is not
preexisting medical conditions, although we all should empathize with
the 4 million of the 320 million of us in America who have uninsurable
preexisting medical conditions, but we are dealing with something on
the order of 70 to 80 million Americans in a given calendar year who
pass through a period of uninsurance, and the vast majority of them are
uninsured because of our insurance pooling arrangements that are still
an artifact of the 1940s and 1950s, where people had one job for
decades at a time.
When I was a college president, until a year ago coming to join you
all here, and I would shake kids' hands at graduation when they walked
across the stage, they were not going to just change jobs, they were
going to change industries three times in their first decade
postcollege. The No. 1 driver of uninsurance in America is job change.
These kinds of policies that we are debating on the floor today make it
harder to create portable health insurance plans that go with people
across job and geographic change, which is actually what is driving the
uninsurance in America.
I thank the Senator for allowing me to sneak in for a minute. I am a
rookie learning my way around here, but I was on the floor listening to
your debate. Thank you for the opportunity.
Mr. HELLER. Mr. President, I thank the Senator from Nebraska for his
input. He is right. There is a broader discussion that has to be had.
The Senator from New Mexico and myself are trying to hit on an issue
that we feel is vitally important going forward as this new excise tax
hits the American people in 2018.
To the Senator from Nebraska, I have no doubt that there is a much
broader discussion that needs to be discussed on health care. In fact,
this discussion the Senator from New Mexico and I are having isn't on
the Affordable Care Act at this point. We are not discussing the
Affordable Care Act. We are talking about a principle within it--a tax
increase that we believe is onerous and important today. What you are
saying is important. Don't get me wrong. It ought to be discussed. We
have to find a venue to have that discussion. Thank you very much for
your involvement.
I want to ask the Senator from New Mexico how this 40-percent excise
tax would affect workers in New Mexico.
Mr. HEINRICH. According to one source, the Kaiser Family Foundation,
one in four employers that offer health care benefits will be affected
by the Cadillac tax in 2018 if their plans remain unchanged. Despite
the fact that the tax doesn't go into effect until then, many employers
have already begun scaling back their coverage to avoid that. Despite
the fact that the tax itself is set to go into effect in 2018, we are
already seeing the impacts to small businesses, to economies now.
As employers consider ways to lower the costs of their health care
plans, many are shifting costs to their employees. Increased
deductibles, copays,
[[Page S8538]]
out-of-pocket maximums, higher copayments and deductibles leave many,
especially low- and middle-income workers, underinsured, who are
exactly the folks who were not supposed to be touched by the Cadillac
tax. These are definitely people in my State who are not driving
Cadillacs. I can assure you of that.
According to a study by the American College of Emergency Physicians,
higher out-of-pocket costs result in delayed medical care as many forgo
essential care when they get sick and become less likely to fill their
prescriptions or stick to their doctors' treatment plans, and those
with higher out-of-pocket costs are also more likely to seek medical
treatment in emergency rooms--the most expensive way to get health care
treatment. This is precisely what we were trying to avoid with the
advent of the Affordable Care Act.
I want to ask my colleague from Nevada, in particular, you mentioned
a number of different constituencies whom you have heard from about
this tax--people such as the culinary workers. Are they upper class,
Cadillac-driving constituents or are they middle-class folks who are
just trying to put food on the table and maybe send their kids to
college someday? Who is going to be impacted by this?
Mr. HELLER. I thank the Senator from New Mexico. I want to go to the
same report. I think it clarifies his point and the question he just
asked me.
Again, as he mentioned, 1.3 million Nevadans are going to be affected
by this 40-percent excise tax. Three-quarters of a million New Mexicans
are going to be affected by this excise tax. So I have hard time
believing that most of them are wealthy enough to have to pay and for
their employers to have to pay this kind of tax.
Let's go back to the Kaiser Family Foundation--a report that you
quoted from. I have a number of statistics. I think it will better
clarify. There is a quote in here that I want to emphasize that answers
the point and the question you brought out. According to the Kaiser
Family Foundation, employees who have job-based insurance have
witnessed their out-of-pocket expenses climb from $900 in 2010 to
$1,300 in 2015. That is an average. That is on average a 50-percent
increase in their health care costs in the last 5 years. Employees
working for small businesses now have deductibles over $1,800 on
average. Kaiser also noted that the deductibles have risen nearly seven
times faster than workers' earnings since 2010.
If you are the average middle-class family, with an average income,
can you imagine your deductibles rising seven times faster than your
earnings have since 2010? Here is the quote from Kaiser's president,
Drew Altman, that really answers your question:
It's quite a revolution. When deductibles are rising seven
times faster than wages . . . it means that people can't pay
their rent . . . they can't buy their gasoline. They can't
eat.
If that doesn't answer the question of who is getting affected by
this--they are individuals who go month to month, week to week, day to
day on their wages. When you have deductibles rising seven times faster
than your earnings, you get to a point, as Mr. Altman said, that you
can't pay your rent, you can't pay your gas, and you can't afford to
eat.
As deductibles rise, another way employers are planning on avoiding a
massive new tax is by eliminating their popular health savings
accounts--HSAs--and FSAs. Over 33 million Americans who have FSAs and
13.5 million Americans who are using HSAs may see these accounts vanish
in the coming years as companies scramble to avoid this 40-percent
excise tax. HSAs and FSAs are used for things such as hospital and
maternity services. HSAs and FSAs are used for things such as childcare
and dental care, physical therapy, and access to mental health
services. Access to these lifesaving services could all be gone for
tens of millions of Americans if the Cadillac tax is not fully
repealed. Deductibles are rising, premiums are rising, and services are
being cut.
Today we have talked a lot about how employers are making major
changes to their workers' health care in order to avoid this tax. If
employers--whether it is a union or private company--are changing their
employees' health care benefits to avoid the Cadillac tax, this tax is
not going to generate the kind of revenue the Congressional Budget
Office originally anticipated.
To that question directly, I ask Senator Heinrich, are CBO's cost
assumptions accurate?
Mr. HEINRICH. I thank the Senator for the question because I think
this is incredibly important. The CBO estimated that the ACA would
generate $93 billion over 10 years with this tax, but when you drill
down on that, only one-quarter of that--about $23 billion--actually
comes from excise tax receipts themselves. The remaining three-quarters
comes from revenue that would be theoretically generated from increases
in taxable wages that some economists expected would be coupled with
reductions in health care benefits. In other words, all the money you
are saving, you are going to pass on to the employees in the form of a
raise. We simply know that is not what happens in the real world. In
fact, employer surveys over the past few years have conclusively
pointed to one unifying fact, that at best employers will not raise
wages for their workers to compensate for downgrading of employee
health insurance benefits.
In fact, a recent American Health Policy Institute study found that
three-quarters of employers said that they would not raise wages in
order to make up for less comprehensive health insurance plans.
I say to Senator Heller, I know we are being joined by the leader
here, and I am going to have to run to another event in a few minutes,
but I want to ask you if you would maybe consider a quick wrapup. I
want to make the point that I think we have gotten as far as we have
with this effort because of the incredible leadership you have shown,
because of the bipartisan nature of this effort, because it is simply
common sense that we need to make sure people have easier access to
affordable care, and that the Cadillac tax may have sounded good at the
time, but we are clearly learning today that this is a Ford Focus tax
that will hit your middle-class families, my middle-class working
families, and it is something we ought to be able to agree should be
repealed.
Mr. HELLER. Mr. President, I want to wrap this up. I know the leader
is here, and I want to give him ample time.
I thank the Senator from New Mexico for his comments and for his help
and support on this legislation moving forward. I appreciate all the
work to get this bipartisan bill to the finish line, and I know we will
continue to work together to repeal this bad tax. Once again, whether
it is my bipartisan bill, our bipartisan bill, this Chamber's
bipartisan bill or a year-end package like tax extenders, we need to
repeal this bad tax. Fully repealing the Cadillac tax is an opportunity
for Republicans and Democrats to work together and join forces to
appeal a bad tax for one purpose, and that is to help 151 million
workers keep the health insurance they love.
Mr. President, I yield the floor.
____________________